Feb. 7 (Bloomberg) — Detroit's plan to reduce its $18 billion of liabilities may derail the biggest wave of Michigan debt issuance since 2009 and elevate borrowing costs as investors renew focus on the state's approach to bondholders.

A proposal last week from Detroit Emergency Manager Kevyn Orr would pay pensioners at more than twice the rate of some bondholders and give 46 cents on the dollar for general obligations backed by the city's unlimited taxing power.

Issuance from Michigan has just started to revive after Detroit's July filing. The state's municipalities sold $464 million of debt in January, the most for the month in five years, data compiled by Bloomberg show. They did so at a price: The developments since July have boosted yields as much as 0.5 percentage point, according to research firm Municipal Market Advisors. Michigan itself pays the second-highest yield spread among states, Bloomberg data show.