In addition to providing relief to those stuck in subprime, high interest rate mortgages, the Housing and Economic Recovery Act of 2008 also provides a unique opportunity for those investors who use municipal bonds in their portfolios. With municipal yields in the ten year range at around 3.75%, and equivalent Treasuries at 3.90%, everyone who pays any taxes at all should be taking a hard look at municipals.
With the signing of the Act, the housing cap that existed for states to issue non AMT housing bonds has all but disappeared. Issuance of non AMT housing bonds is expected to rise dramatically over the next few months as states issue bonds to finance mortgages made available by the Economic Recovery Act. As supply increases, so too should the yields available to the municipal bond buyers. In fact, non AMT housing bonds are yielding approximately 100 basis points (1%) more than non housing bonds with the same rating.