Navigating Tax & Public Policy for Today's Municipal Market

In an era of shifting legislation, tightening budgets, and evolving federal policy, understanding the intersection of tax law and municipal credit has never been more critical. MacKay Municipal Managers™ and Bloomberg Intelligence brought together a panel of experts to break down the implications of the recently passed One Big Beautiful Bill (OBBB) and what it means for the municipal bond market.

• Tax Exemption for Munis Preserved and Slightly Expanded
  The One Big Beautiful Bill (OBBB) keeps the tax exemption for municipal bonds in place, which supports investor confidence. It also adds spaceports as a new eligible issuer, slightly expanding the market.

• Boosted Relative Value Amid Stable Tax Policy
  With no changes to individual or corporate tax rates, muni bonds remain attractive. High yields and clearer tax policy make them easier to plan around for long-term investors.

• Increased Institutional Demand Expected
  Banks and insurance companies are returning to the muni market. Tax-equivalent yields are now higher than similarly rated corporates, especially on longer maturities, boosting appeal.

• Healthcare Sector Faces Credit Headwinds
  Changes to Medicaid and ACA rules may pressure nonprofit healthcare issuers. While not a broad crisis, investors should watch credit quality closely.

• Strong Credit Backdrop for State and Local Issuers
  States and cities are in a strong position with healthy reserves and revenue growth. Even with reduced federal funding, most general obligation issuers remain stable.

With the muni tax exemption preserved, reduced policy uncertainty, strong credit fundamentals, attractive tax-equivalent yields, and renewed institutional demand, municipal bonds may continue to offer value in a diversified portfolio.

Watch the full recording to hear our perspectives on policy risks, sector impacts, and how this new regime is shaping municipal bond strategy going forward.