Tax Policy, Retirement Security, and Municipal Bond Market Segmentation
Publication Date
8-19-2026
Abstract
Municipal bonds are central to retirement portfolios, offering tax-advantaged income that attracts households and institutions alike. Yet the very tax incentives that make these bonds appealing also create segmentation: incremental state-level tax privilege concentrates ownership locally, limits risk sharing, and heightens the sensitivity of yields to local issuance and idiosyncratic shocks. Evidence from primary issuance and secondary trading reveals similar fragmentation, although each margin has attenuated as the market has institutionalized. What appears to be a safe and straightforward retirement asset is, in fact, embedded in a market whose segmentation is persistent but evolving, with important consequences for public finance and retirement security.
Document Type
Article
Keywords
municipal finance, tax policy, market segmentation, risk sharing, retirement security
Disciplines
Finance
Language
English
