TEYs above 7% and pushing 8% in High Tax States

Watkinson Capital continues to locate investment grade #MuniBond Tax Equivalent Yields (TEYs) above 7% and pushing a 8% for high tax states with maturities less than 10 years. In other words, we are locating nominal tax-exempt yields 3.5% and close to 4%.

Two crucial benefits of owning individual #MunicipalBonds is the predictability upon purchase. The investor know exactly when they will receive coupon payments, what amount the coupon will be and when they will receive their capital back. Conversely, MuniBond Mutual Funds/ETFs have infinite maturities and this predictability is lost.

Secondly, despite being in a rising interest rate environment for most of 2022, these bonds will heal over time as they approach maturing at par. Patience is a virtue when owning an individual bond. Your patience will be negated if you own a mutual fund and the other investors LOSE patience and sell.
Finally, money market rates and CDs rates are still too low.
  • Money Market Rates yield 0.16% taxable. 
  • 5 year CD rates average 1.88%. 
  • With TEYs for investment grade MuniBonds above 7% and even pushing 8%, one can better protect their purchasing power against inflation and continue to sleep at night.


View All Recent Posts