The federal government may have astronomical deficits but it can still borrow with ease at rock-bottom rates. Not so states, municipal governments and other government agencies, such as school districts and public-transport bodies, which have historically borrowed at lower rates than the Treasury. That is because interest on municipal bonds is generally tax-exempt. Investors accept a lower yield on a muni-bond than on a comparable Treasury bond on which they pay tax.rnThanks to the financial crisis, however, that position has changed: municipal yields are much closer to and, in some cases, above those on Treasuries (see chart). Some borrowers have scaled back or shelved planned borrowing.
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