Cliff deal adds value for muni debt for now-report

SAN FRANCISCO Wed Jan 2, 2013 8:22pm EST

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SAN FRANCISCO Jan 2 (Reuters) - With U.S. municipal bonds' tax exempt status not affected by the deal that averts the "fiscal cliff," tax-exempt debt issued by states and cities should gain value "at least for now," a Wells Fargo Securities report said on Wednesday.

The report said there is "increased value for the tax exemption given the higher taxes on the wealthy and the new investment income tax, at least for now."

The report noted it is "still conceivable" Congress could limit municipal debt's tax exemption in its search for revenue.

The $3.7 trillion U.S. municipal bond market has been closely tracking the wrangling in Washington over the nation's finances out of concern that federal tax-exemption policies on muni debt's interest payouts, a top attraction for investors, could be changed by federal policymakers.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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