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The taxable municipal bond market developed following the 1986 tax law reform. Among other changes, the reform eliminated municipalities’ ability to issue tax-exempt bonds for anything that did not benefit the public at large. Municipalities could issue only taxable bonds for projects that did not meet the public-benefit standard.

While the taxable municipal bond market grew consistently from 2003-2008, comprising close to 8 percent of total municipal bond issuance and roughly $30 billion per year, the advent of the Build America Bond (BAB) program has positioned the market to grow substantially.

The Build America Bond program allows municipalities to issue taxable bonds in the place of what traditionally would be tax-exempt borrowings and receive a 35 percent subsidy on the coupon payment directly from the federal government. Above and beyond historical taxable municipal issuance, estimates of the amount of issuance resulting from the Build America Bond program are as high as $150 billion. Although set to expire at the end of 2010, Breckinridge believes the Build America Bond program will be extended.

  Introduction to Build America Bonds

  Taxable Muni FAQs


Special Commentary


  July 2010 - Advantages of Taxable Muncipals vs. Corporates

  March 2010 - Building a Fixed-Income Portfolio with Taxable Municipal Bonds

  May 2009 - Taxable Municipal Bond Portfolios