One can mimic the effect of shorting treasury zeros with interest rate swaps
I'm not privy to this broker's tax analysis - what I'm not sure about is the tax effect of shorting a zero coupon bond. If you are long a zero, then you have imputed earnings each year because of OID, but I'm unclear whether you you have a deductible imputed ordinary income loss each year if you are short. (But if you did this with a traditional Treasury bond, you would certainly have a deduction for the interest payment each year, but you lose the cash flow advantage).
Doing this scheme with swaps would I think lose the tax advantage of any deduction.
The other wrinkle is that long dated munis are generally callable, so there is some interest rate risk as well.
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