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Bloomberg

Bond Market Unlikely to React Strongly to Tax Plan: Analysts

By Allyson Versprille

President Donald Trump’s tax plan is unlikely to trigger a frenzied municipal bond sell-off even if it includes provisions that negatively impact the exempt bond market, analysts told Bloomberg BNA.

Conflicting messages on tax reform from high-level officials in Trump’s administration have desensitized the market, Citigroup Inc. analysts Vikram Rai, Jack Muller and Loretta Bu said in an April 24 note to clients. “Now investors seem to shrug off statements from the administration regarding tax-reform” though they haven’t completely discounted that an overhaul could happen eventually, they said.

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Tim HollerTax
Governing

The Week in Public Finance: Ballmer's Data Trove, Grading Pension Health and a New Muni Bond Threat

That lower demand for munis would drive up their interest rates and make it more expensive for governments to issue bonds. That introduces the possibility that reformers would argue the exemption therefore doesn't make much of a difference in goverments' borrowing costs. This could be the ammo some need to nix the perk entirely. That, noted Municipal Market Analytics’ Tom Doe this week, could be a boon for public-private-partnerships (P3s), “under the guise of efficiency, savings and jobs for the middle class.”

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Tim HollerTax