Barclays is warning that if a Build America Bond subsidy payment is reduced under sequestration and this triggers an extraordinary redemption provision, the issuer may be able to call those BABs anytime, even years later when market changes make the call affordable.

However, few issuers would likely be able to call their BABs because most ERPs would not be triggered by the cuts to subsidy payments, the bank contends in a research report issued Thursday.

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