Loss of tax revenues, user fees and consumption at the local level could result in further belt-tightening.
With three more more months of legislative wrangling ahead, investors run the risk of growing indecisive.
In the eleventh hour of the first night of 2013, Congress passed legislation which, among tax increases and other items, left the municipal bond coupon tax-free and unscathed.
As shown in the chart (above), the yield spread between investment grade AAA and BBB municipal bonds was 214 bps at the end of June.
