The nation's 500 largest commercial banks increased their holdings of municipal bonds by 2.9% in 1993, according to federal banking reports.

The book value of the banks' portfolios reached $35.68 billion, up by a little more than $1 billion. The gain is only the second since 1985, the year before tax reform eliminated the 80% deduction of purchase and carrying costs that banks could take for holding municipals.

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