Build America Bond ETFs May Get a Second Chance | ETF Trends

The popular Build America Bonds program may get a second chance at life if President Obama’s budget passes in its current incarnation.

The budget not only calls for the program to be revived, but it wants to make the program permanent. Last year, however, Republicans blocked efforts to extend the program and it could meet with similar resistance this time, says Bloomberg.

Since the program’s end, Build America Bond ETFs got caught up in a selloff and performance suffered. PIMCO Build America Bond Strategy (NYSEArca: BABZ), PowerShares Build America Bond Portfolio (NYSEArca: BAB) and SPDR Nuveen Barclays Capital Build America Bond (NYSEArca: BABS) have all lost between 1.5% and 2% in the last month.

Municipal bond ETFs reacted nicely to the news late last week when another bill to restore the Build America Bonds program was introduced. The iShares S&P National AMT-Free Municipal Bond ETF (NYSEArca: MUB) and the iShares Barclays 20+ Year Treasury Bond ETF (NYSEArca: TLT) were both up last week by 2.3% and 0.7% respectively on the news. [Pullback In Muni ETFs-Just A Blip?]

Randall Forsyth for Barrons reports that the bill is the brainchild of Rep. Gerald Connolly, D-Va. His bill proposes to extend the BABs program through 2012 at subsidy rates of 32% in 2011 and 31% in 2012. The ending of the BABs program was a big reason for the large sell-off  in the muni market. [Muni Market Collapsing: How Do Active Munis Compare?]

If Obama’s proposal goes through, that would be an even better deal.

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.