https://www.wsj.com/finance/investing/savers-bid-a-sad-farewell-to-higher-yields-70e2e10b
The era of 5% yields is fading, and savers are facing reduced returns on savings accounts, certificates of deposit (CDs), and money-market funds as the Federal Reserve lowers interest rates. This shift has significant implications for those who rely on the higher yields for supplemental income.
Elementary level read by the Wall Street Journal... These folks need to pay attention to the blog and Jeff Watkinson's newsletter.
We are continuing to lock 4% plus yield on investment grade MuniBonds with 9-10 years of call protection.
4% nominal tax exempt yields offers a much higher TEY or Tax Equivalent Yield.
"Back of the Napkin" calculation to determine the TEY of a tax-exempt MuniBond:
- For low tax states such as Pennsylvania, apply a factor of 1.75 to determine a rough estimate of a TEY.
- For high tax states such as California, New York, Oregon, New Jersey or Massachusetts, apply a factor of 2x.
- For example, a recent AA-rated PA MuniBond came to market at a 4.23% yield, for a Pennsylvania resident, the TEY would yield 7.40%
Investors can achieve better yields and predictability than:
- CDs 1-5 year
- Money Market Funds
- Savings accounts
- U.S. Treasury Bills
Best,
Jeff Watkinson
jeff@watkinsoncap.com
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