A Retroactive 28% Cap on Muni Bonds?

In recent fiscal cliff discussions, President Obama has floated the idea of a retroactive 28% cap on municipal bonds.  A recent research report from Citi estimated that up to $150 billion bonds might be subject to mandatory calls at par if the proposed 28% cap were enacted on a retroactive basis.  Although the cap did not make it’s way into the final fiscal cliff agreement, market experts believe the threat persists as lawmakers and the administration squabble over whether to: raise the debt ceiling; allow sequestration to take place; and adopt another continuing resolution to keep the federal government funded. There is a looming March 27, 2013 date for these decisions.  See the full article on this topic in the Bond Buyer here.

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