State financial health has improved as tax receipts rebound and states receive sizable federal aid.
Washington’s off-again, on-again debate about the tax exemption of municipal bonds appears to be off again as lawmakers grapple with budget and debt issues. Proposals to change the tax treatment of municipal bonds could resurface again during the congressional elections in late 2014.
The classic strategic reasons to own municipal bonds still hold true: They generally have low correlations to other asset classes and offer a meaningful tax advantage to investors — features that we believe are unlikely to change in the near term. However, the municipal bond market has experienced a significant shift over the past several