A slowdown in cigarette consumption declines, a settlement in New York with the big tobacco companies, and strong demand for risk assets is supporting a rally in the high-yield tobacco bond sector.

"In a market characterized by low rates and tight spreads, tobacco securitization bonds have provided a source of yield for various institutional accounts as well as for those high net worth investors who have appropriate risk tolerance and understand the dynamics of the sector," said Jeffrey Lipton, head of municipal research and strategy at Oppenheimer & Co.

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