Muni Bond Buyers Expected a Sideshow. They Got a Major Surprise
- Tax plan would roll back some big municipal debt programs
- Advanced refunding, private activity bonds would be scrapped
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Municipal bond analysts and portfolio managers expected the Republican tax plan to affect only the margins of their industry, tinkering with demand by cutting corporate rates or eliminating the Alternative Minimum Tax.
They didn’t anticipate the detail on page 275 of the 429-page document: a repeal of the tax-exemption for advance refunding bonds, a major source of supply for the $3.8 trillion market. More than $37 billion of the securities have been issued already this year, according to data compiled by Bloomberg.