While we are beset by constant reminders of the faltering status of public pension systems across the entire country, there's a new source of pension funding that's showing great promise for both investors and retirees.

According to Bloomberg, cities across the U.S. sold nearly a billion dollars' worth of taxable pension bond securities in 2012, up nearly a third from the $670 million sold in 2011.

The reason? Near all-time-low interest rates are creating massive demand for investments that have offered some very strong yields to investors. BofA Merrill Lynch analysis suggests that the taxable city and state pension bond market earned 11.1 percent last year, versus 7.3 percent in standard muni credit.

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