Obama to Recommend Making Build America Bonds Program Permanent
Posted by Gregg Killoren on February 1, 2010
The Obama administration will release its proposed 2011 budget today, and while the $1.6 trillion deficit is likely to grab the headlines, investors may want to pay attention to the President’s proposal to make the Build America Bonds (BAB) program permanent.
In a statement sent to The Bond Buyer, Treasury Secretary Tim Geithner commented, “By making Build America Bonds a permanent and expanded financing tool for state and local governments, we’re investing in our country’s long term economic growth in a cost-effective way.”
The BAB program is currently scheduled to expire at the end of 2010. The proposed plan would reduce the subsidy from 35 percent to 28 percent beginning Jan. 1, 2011, but would greatly expand the program’s reach to include refundings, working capital, as well as permitting nonprofit hospitals and universities to issue the debt. The lower subsidy is intended to make the program’s cost equivalent to the cost to the federal government of traditional tax-exempt bonds.
Total BAB issuance from April 15, 2009, through Jan. 28, 2010, is $70.983 billion, across 878 issues, according to data from Thomson Reuters. In January alone, issuers sold $6.862 billion of BABs across 87 issues.
Investors looking for some safety and income as equity markets become choppy again may want to keep an eye out for BAB issuances this year.
