Traditional finance theory holds that an asset's value is the present value of its future cash flows. Practically speaking, this means the price an investor paid for an asset in the past should not affect what they'll pay for that same asset today or tomorrow. And yet, recent evidence from the real estate and corporate bond markets suggests the current prices of many assets are closely linked to their past prices. Some finance experts attribute this to “anchoring,” or the cognitive tendency for decision-makers to over-rely on an initial piece of information. In this paper, I test for anchoring in the market for bonds issued by state and local governments (i.e., "municipal bonds"). The results suggest anchoring is common. Specifically, for every 1 percent increase in a government’s past interest rates, the interest rate on its new bonds will be about 10 basis points (.10%) higher. This suggests that in the past decade, as market interest rates have fallen steadily, state and local governments have paid billions of dollars in additional borrowing costs. These findings have important implications for state and local government financial management, as well as financial reporting practices.