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Muni Market's Trusted Buyers Could Disappear After Tax Cuts

  • Could leave ‘demand hole’ for debt maturing in 10 to 17 years
  • Tax rate drop to 21% from 35% makes munis less attractive

Banks and insurance companies could once be trusted to scoop up state and local government debt. Now, they could start looking elsewhere to invest.

By cutting the corporate tax rate to 21 percent, tax-exempt municipal bonds could lose their allure to corporate buyers. That could have a major impact on the pricing of the longer-dated bonds these institutions tend to buy, analysts say.