Fund Insider

Why the Government Doesn't Belong in the Municipal Bond Business

Another important question, if the fed guarantee munis, are they still to be considered tax exempt from federal income tax ? If not, this could have an offsetting effect. Borrowing rates/yields for municipalities would decrease with the guarantee, but increase when investors lose the tax advantage. Not sure whether the net effect is an advantage or disadvantage for munis at this point. Munis do pay much more than the feds to overcome the current credit fears, and if rates go low enough (as low as US TSYs), who will care what % you keep ?