Municipal investors at client meetings with BlackRock are expressing more concern about rising interest rates than about the potential impact of tax reform – to the surprise of officials in the firm's muni group.

"With all the uncertainty with munis and how it relates to tax policy, you would think that would be first and foremost on investors' minds, but it's actually not," Peter Hayes, managing director and head of the municipal bonds group at BlackRock, said at a roundtable discussion with reporters on Tuesday. While interest rate increases by the Federal Reserve are "clearly more in play than they've been in quite some time," tax reform issues could drive the market, he said.

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