Investors speculate on return of crisis-era Build America infrastructure bonds under split Congress

Investors speculate on return of crisis-era Build America infrastructure bonds under split Congress

This infrastructure-bond structure, backed by federal subsidies, could face uphill battle in Congress.

With Democrats sweeping into the House in the midterm elections, analysts are touting the potential comeback of crisis-era municipal bonds as part of a broader infrastructure bill.

Talk of major infrastructure legislation has gained ground as investors marked it out as the rare area where Democrats and President Donald Trump shared common ground. That has drawn speculation of the potential re-introduction of Build America Bonds, taxable municipal bonds issued by local governments to finance infrastructure projects, that came to life in 2009 when former President Obama launched a wave of fiscal stimulus measures to revive a recession-hit economy.

“It may be brought back in some form,” said John Mousseau, director of fixed income at Cumberland Advisors.

The need for infrastructure spending has been felt on both sides of the aisle.

Mousseau pointed to the strong demand for recent multibillion dollar bond sales funding a new terminal in New York’s LaGuardia airport and a replacement for the Tappan Zee bridge, both of which relied on a mix of taxable and tax-exempt municipal debt.

“Big deals have had no problem selling bonds,” said Mousseau.

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