WASHINGTON -- Rules issued by the Internal Revenue Service on Friday should help the municipal derivatives market because they clarify the tax accounting principles used for interest rate swaps and other so-called notional principal contracts, several lawyers said this week.

"The rules should permit investors to enter into more flexible hedging transactions with respect to their municipal bond investments because they are more flexible" than rules proposed in 1991, said George Wolf, a lawyer with Orrick, Herrington & Sutcliffe in San Francisco.

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