Emerging from a challenging year in 2013, the municipal bond market could see brighter days in the coming year, according to bond authorities cited in a recent article on Governing.com. Risk factors still exist, but here are a few of the “positive vibes” for 2014:
- In an election season, it is unlikely the two political parties could agree on a tax bill that includes a reduction in the benefit from the municipal bond tax exemption;
- The ruling in the Detroit bankruptcy case that pensions do not have primacy over other creditors was a positive development, although the decision faces litigation;
- Municipal bonds are exempt under the Volcker Rule, allowing banks to continue as solid municipal bond customers. In its original form, the rule would have disallowed proprietary trading in municipal bonds and possibly put limitations on how banks market the municipal bonds they own;
- Direct retail investment in municipal bonds started to rebound in 2013, and direct retail (as opposed to institutional investors) is a significant source of demand; and
- Outflow of money from bond funds has slowed and positive flows are expected at some point this year.
“Will the 2014 Muni Market Be Good for Issuers?” by Penelope Lemov was published on Governing.com on January 30, 2014: www.governing.com/topics/finance/gov-2014-municipal-bond-market-good-issuers.html.