(Bloomberg) — President Donald Trump's failure to win a swift overhaul of the Affordable Care Act is delivering gains to a niche of the municipal-bond market.
Tax-exempt hospital debt has resumed its more than three-year run of outperformance as the Republican-led Congress struggles to come up with a replacement for the Affordable Care Act, which helped health care providers by reducing the ranks of the uninsured. The securities have returned 4.3% this year, 0.7 percentage point more than the broader municipal market, according to S&P Global Ratings indexes.
"It's aggressive to get it through in such a short period of time — probably unrealistic on their time frame for something as far-reaching and complicated,'" said George Huang, director of municipal securities research for Wells Fargo Securities. "The fact that the hospital industry -the people in the health care space -are not a part of the conversation, that makes it difficult."
Trump's victory in November initially weighed on the performance of hospital bonds because he pledged to quickly roll back and replace President Barack Obama's signature law, casting uncertainty over the industry. By expanding the Medicaid program for the poor and requiring others to purchase insurance, the Affordable Care Act reduced the financial strain on hospitals from treating the uninsured.
