Oddbean

The Trump trade misses $153 billion of munis pricing in tax risk ========== A $153 billion pocket of the municipal-bond market is trading like a tax on all but the wealthiest Americans will return to bite the middle class. Trump-era tax cuts set to expire next year increased the exemptions on a tax for high-earning taxpayers known as the alternative minimum tax (AMT). Muni bonds subject to the tax trade at yields higher than tax-exempt securities. Concerns that a broader swath of investors will fall under the tax's umbrella have widened the gap in yields between AMT and non-AMT bonds. The Tax Cuts and Jobs Act (TCJA) reduced the number of filers subject to the AMT, but when it expires, 7.2 million taxpayers will be subject to the AMT starting in 2026. A Trump victory or a "Blue Wave" in the elections could result in the extension of the current AMT tax regime. Many separately managed account managers are avoiding AMT bonds, and AMT spreads have widened because ETFs and most mutual funds can't buy AMT bonds. https://theedgemalaysia.com/node/720287