Also, removing one potential impediment, senior White House economic advisors have told state and local officials that tax-exempt bond interest is “off the table” and will not be part of the administration’s proposed 28% cap on the value of exclusions, deductions and other tax preferences for wealthy taxpayers. “This is likely to boost confidence for muni investors,” he noted, along with improving credit quality.

However, muni bond investors need to be mindful of the potential the Dodd-Frank legislation may have on the market. Ratings agencies may change the way they rank the creditworthiness of the bonds, which may result in “super downgrades.” [Could ‘Super Downgrades’ Hit Muni Bond ETFs?]

iShares S&P National AMT-Free Municipal Bond Fund (NYSEArca: MUB)

For more information on munis, visit our municipal bonds category.

Max Chen contributed to this article.