No. of Recommendations: 0
$2 billion California Build America Bonds (BAB's) program general obligation bonds are due out next week (April 21). While short of the governement gauranteeing muni's if this goes well it should help my CA muni's significantly. The federally taxable bonds (usually still state tax free) offer either a tax credit to investors or a federal subsidy to issuers of 35 percent on their interest costs. So far, issuers are opting for the subsidy. According to JP Morgon the net effect of the subsidy amounts to about 10-12% less interest having to be paid by the state or local government. The bigger deal is Build America Bonds:

Allow CA and local governments easier access to capital for infrastruture construction projects (continued access means less risk of default on my existing muni's, think refi)
Should reduce regular muni supply (e.g. they'll use these for any infrastructure stuff and only use regular muni's for non-infrastructure)
Should broaden the base and attract new buyers for municipal debt since the new structure is attractive even to those who pay no or low federal taxes (the subsidy replaces the federal tax break).

I'm crossing my fingers

P.S. Same principle for other state's and local government entities
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