MuniBond Yields remain attractive but Fleeting

8-10% TEY (Tax Equivalent Yields) remain Gettable

but the Opportunity is fleeting

The dropping of MuniBond yields during the last week of July signals a shrinking window for attractive investment opportunities. With Municipal-to-Treasury ratios still high, the relative value of MuniBonds to US Treasuries is appealing and even attracts crossover buyers.

These crossover buyers cannot take advantage of the tax-exemption of the bond interest.

This is significant because a crossover buyer is an investor, country, foreign buyer or an institutional account who primarily invests in taxable fixed-income securities, such as corporate bonds or US Treasuries, but opportunistically enters the municipal bond market when yields are compelling enough to outweigh the tax-exempt benefits.

However, weakening GDP and jobs data, coupled with growing expectations for rate cuts and concerns about the independence of economic institutions, are adding urgency.

Investors need to act quickly to capitalize on these conditions before they shift, as market pressures and data reliability issues could complicate the outlook.

According to the CME FedWatch tool as of August 7th, the market now sees a 91.4% probability of the Fed cutting interest rates by 25-basis-points following its next meeting – up from 63.3% a week ago and 64% last month. The changes come after the FOMC held rates steady at its July meeting last week

2 Examples of MuniBonds we purchased for investors in August:

California MuniBond

4.75% Coupon

10 years of Call Protection

AA-rated, unlimited GO, BAM insured

Dollar price $97.578

4.91% yield to the 2035 call

Tax Equivalent yield for a California Resident is approximately 9.82%

South Carolina MuniBond

5.00% Coupon

10 years of Call Protection

AA-rated, Revenue Bond

Dollar price $98.317

5.11% yield to the 2035 call

Tax Equivalent Yield of 8.94%

We continue to be very focused on newly issued “priced to sell” MuniBonds with 9-10 years of call protection and longer maturities like the two examples above.

However, if you have a custom need for your capital, we can accommodate you. EG: short maturities, 20-year non-call MuniBonds, and/or zero-coupon (zeros) bonds for college tuition saving, retirement etc.

Get more predictable returns in your portfolio.