Muni Bonds Vs BAB Bonds
On the topic of Muni bonds Vs BAB bonds, investors who are considering the possibility of investing in Build America Bonds, but are wondering what sets them apart from the traditional municipal bond, should take it upon themselves to do thorough research.
The Difference between Muni Bonds Vs BAB Bonds
We already know a municipal bond is issued by a city or other local government, but BABs are the new kid on the block and were first introduced as a part of the federal stimulus plan. Build America Bonds are classified as municipal bonds, but there is a notable difference between the two: BABs are taxable and carry special tax credits and federal subsidies for the issuer of the bond or the bondholder.
What Exactly Are BABs?
Like municipal bonds, BABs are debt securities issued by a state, municipality or county to finance the expenses. This now widely popular program was created by the American Recovery and Reinvestment Act of 2009 as a part of the economic stimulus package created by President Obama.
Why Buy BABs?
Since the implementation of the federal stimulus package, BABs have been a huge hit in the market place. There are many upsides to investing in BABs, but you still want to rely on personal research and bond analysis to assess pricing and risk.
BABs were created to help debt-drowning municipalities save some money, and the attractive yields they offer would clearly attract investors, helping to expand the market for municipal bonds. In the recent past, local governments, in almost every state, have saved billions by using these BABs to finance projects to rebuild the framework of society and create jobs. This type of bond is supposed to last throughout 2010, with all bonds being issued before January 1, 2011. Build America Bonds have proven to be such an overwhelming success, however, that President Obama is looking to continue this part of his stimulus plan for years to come.
Smart Investing
BABs should still be approached with the same level of caution as any bond. You can’t solely rely on the ratings to predict default risk, so it’s important to take matters into your own hands and assess the yields and pricing. Fortunately, BondView.com provides tools and services that allows you to view a personalized muni portfolio analysis that can help you follow and keep tabs on your equity.