For more than a year, municipal market participants have looked to Washington for policy changes to help restore state and local governments' access to affordable capital. With the passage of the stimulus package earlier this month, the cavalry finally arrived.

And now the battle begins. The fact that the stimulus provisions impacting bonds expire at the end of 2010 means the next two years will be a crucible for the marketplace. Issuers will have access to a wider array of financing tools than ever before, and how they use them has the potential to re-shape the practice of municipal finance for decades. Congress and the White House will be watching to see how their new programs perform - and whether the municipal market can regain its legs (and historic yield advantage over Treasuries).

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