On June 24, US President Joe Biden announced his support for the “Bipartisan Infrastructure Framework.” This $1.2 trillion agreement was developed by 10 Republican and 10 Democratic Senators. This plan essentially strips out the social infrastructure programs included in the original plan and focused on traditional infrastructure projects. Of the $1.2 trillion, $579 billion represents new spending with the rest funding several existing programs, including a recently passed water infrastructure bill and the surface transportation bills.
Of the new spending, $312 billion is for transportation infrastructure, with the largest components being $110 billion for roads, bridges and major projects and $66 billion for passenger and freight rail. The remaining $266 billion is for other infrastructure including $73 billion for power infrastructure and $65 billion for broadband.
The details on how the plan would be paid for are not clear at this time. The plan cites unspent COVID-19 relief funds, public-private partnerships and infrastructure revolving funds as possible sources. While we expect municipal bonds to play a part of this plan’s implementation, the framework does mention private activity bonds and direct pay municipal bonds as being tools.
This agreement was just a framework and the next step will be drafting actual resolution that would go first to the Senate and then to the House for approval before the budget reconciliation process.
While this framework has a ways to go before becoming law, it is an important milestone in the process. We will continue to provide updates when opportunities arise.
What Are the Risks?
All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Because municipal bonds are sensitive to interest rate movements, a municipal bond portfolio’s yield and value will fluctuate with market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the portfolio’s value may decline. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value.
Important Legal Information
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.
The views expressed are those of the author and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.
Any research and analysis contained in this presentation has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.
Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.
Issued in the U.S. by Franklin Distributors, LLC., One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, franklintempleton.com – Franklin Distributors, LLC, member FINRA/SIPC, is the principal distributor of Franklin Templeton U.S. registered products, which are not FDIC insured; may lose value; and are not bank guaranteed and are available only in jurisdictions where an offer or solicitation of such products is permitted under applicable laws and regulation.
Please visit www.franklinresources.com to be directed to your local Franklin Templeton website.
Franklin Distributors, LLC. Member FINRA/SIPC. Prior to July 7, 2021, Franklin Templeton Distributors, Inc., and Legg Mason Investor Services, LLC served as mutual fund distributors for Franklin Templeton.