According to recent data from the Federal Reserve, the super-rich hold fewer Treasuries and municipal debt than they did nearly two decades ago.
As of June, such assets held by the top 1 per cent of households totaled $887 billion, the lowest in 17 years and well below the peak of $1.5 trillion a decade ago.
Americans in other income groups have also been cutting back on national debt and municipal debt assets. Holdings peaked at about $3,000bn in June 2019 and have fallen by nearly $400 billion since then.
High earners have traditionally tended to buy municipal bonds to get a tax exemption for interest income.
But Peter Boockvar, chief investment officer of Bleakley Advisory Group, said that with Treasury and municipal bond yields near historic lows, they may "look elsewhere for higher yields, such as stocks, high-yield or investment-grade bonds, private credit, cryptocurrencies, etc."
The yield on the benchmark 10-year Treasury note is now around 1.55 per cent, above the all-time low set last year, but far from its long-term average. Meanwhile, inflation has been above 5 per cent for months.
"High-income people may be well aware that their real returns on Treasuries and municipal debt are negative," said Chris Ahrens, a strategist at Stifel Nicolaus&Co.
According to fed data, the top 20% of wealthy households own 74.2% of treasury bonds and municipal securities, the lowest level on record since 1989.