BABs Returns Beat Treasuries

Build America Bonds, orphaned after Congress failed to extend the program in 2010, are on a pace to beat Treasuries and tax-exempts for a third straight year.

Created by President Barack Obama’s 2009 economic stimulus, the taxable bonds have earned 8.3 percent this year through Sept. 12, compared with 1.7 percent for federal debt and 5.8 percent for tax-free munis, Bank of America Merrill Lynch data show.

Issuers from California to Maine sold $188 billion of BABs in the program’s 21 months. Congress has resisted renewing it amid Republican opposition to the program, which subsidizes 35 percent of issuers’ interest costs. At a time when local-government interest rates are close to 45-year lows, BABs offer a yield boost that has also lured international buyers who don’t benefit from traditional munis’ tax exemption.

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