Build America debt obligations were first crated under President Barack Obama’s 2009 American Recovery and Reinvestment Act where municipalities sold $188 billion of the debt before the program expired at the end of 2010. The Build American Bonds helped diminish borrowing costs for state and local governments as part of a stimulus package. Local governments used the bonds to pay for infrastructure projects and received a 35% federal subsidy on interest payments.
Investors should keep in mind that unlike other municipal bonds, Build America Bonds are taxable fixed-income securities.
Additionally, since the program expired, the Build America Bond market maintained its value due to the finite amount of debt in existence, according to Bart Mosley, co-president of Trident Municipal Research, and Boccellari.
PowerShares Build America Bond Portfolio
For more information on the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.