The largest exchange traded fund indexed to municipal bonds was down for the seventh straight session Monday on fears the asset class may lose some of its tax advantages and as borrowers saturate the market with new issuance.

One compromise in the fiscal cliff negotiations could be taxing at least a portion of municipal-bond interest paid to wealthy investors, The Wall Street Journal reported last week. [Muni Bond ETFs Tumble on Tax-Break Speculation]

Municipal bonds are a $3.7 trillion market. Some high-income investors find muni yields attractive relative to other bonds because the income is tax-exempt, although there is rising speculation that could change.

The largest ETF in the category, iShares S&P National AMT-Free Municipal Bond Fund (NYSEArca: MUB), traded at a discount to indicative value for the first time since July “as states and cities flooded the market with the most borrowing in six months,” according to Bloomberg News.

On Friday, the muni bond ETF traded at a discount of 0.52%, according to Morningstar data.

Yields on 10-year muni bonds rose to the highest since Nov. 7 last week as borrowers issued about $20 billion of long-term debt, the most since June, Bloomberg reports.

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