President Trump’s call for $1 trillion in infrastructure spending could swell the nation’s municipal bond supply, for example, while the possibility of lower corporate tax rates could reduce the appetites of banks<br />and insurers, which now own about 30 percent of muni bonds.<br />While a sharp rate spike would cause bond prices to suffer bigger losses, Christopher Ryon, municipal bond manager at Thornburg Investment Management, noted<br />that “we are not in a situation where rates are going to take off.” (Bond prices and bond yields move in opposite directions.<br />Yet, Mr. Hayes said, “There’s also the possibility<br />that the ability of corporations to deduct corporate bond interest goes away.” That would lead to less issuance of corporate bonds — and that could increase demand for muni bonds.<br />That works out to a 3.73 percent taxable equivalent yield for someone in a 33-percent federal income tax bracket<br />As for eliminating the exemption for interest income, changing it would affect thousands of municipalities<br />that rely on muni bonds to finance their public works.
