The Popularity Of (And Problem With) Municipal Bonds : Planet Money Thirsty for yield, and eager for tax breaks, investors are falling over themselves to buy municipal bonds. That could be a problem if the economy turns sour.
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The Popularity Of (And Problem With) Municipal Bonds

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The Popularity Of (And Problem With) Municipal Bonds

The Popularity Of (And Problem With) Municipal Bonds

The Popularity Of (And Problem With) Municipal Bonds

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  • <iframe src="https://www.npr.org/player/embed/794648421/794661977" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
John Labbe/Getty Images
Illustration of bond certificate
John Labbe/Getty Images

Municipal bonds, or "munis," are having a moment. With interest rates at near-historic lows, investors are thirsty for yield. They're also keen to maximize any tax advantages that might be available to them, following recent changes to the tax code. Munis fit the bill in both cases, as riskier issuers come to market, with lower-rated and higher-yielding bonds.

This is great news for towns, cities and other municipal borrowers, who are able to fund their growth projects. But there are hidden risks for investors and for the wider economy. Marilyn Cohen of Envision Capital Management, Inc., joined us to walk through some of the pitfalls that the muni bond craze might bring.

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