The municipal market rallied significantly Tuesday as participants placed bets that a stimulus package from Washington was coming closer to being reality and news that the Federal Reserve may be given authority to buy longer-dated municipal debt made its way around the Street.
The short end in particular was rebounding from the extraordinary sell off of the past two weeks after the Fed yesterday announced it would include variable rate demand obligations as well as short-term paper to its balance sheets.
While there was still no definitive answer from Washington on what the stimulus package might fully entail and whether the Fed would buy longer-term munis even if given that authority, the market was baking it into secondary trading on Tuesday.
(Read more: The Latest)
