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What You Must Know
- In states like California and Texas, buyers within the prime tax bracket can reap yields starting from 8% to 10%.
UBS Monetary Providers Inc. is urging buyers to purchase the debt of states, whose credit score high quality is among the many highest within the $4 trillion municipal bond market and whose bonds are providing sky-high after-tax yields.
Sturdy income development, record-high money reserves and billions in pandemic stimulus strengthened the credit score high quality of U.S. states, simply as a muni-market selloff has pushed yields to their highest ranges for the reason that monetary disaster greater than a decade in the past.
In New York, for example, yields on 30-year debt are 4.8%. On a tax-equivalent foundation, which accounts for tax financial savings, that interprets to roughly 9.8% for patrons within the state’s prime tax bracket, in keeping with a Friday analysis observe by Kathleen McNamara, senior municipal strategist at UBS.
“Given the upper yield atmosphere, we imagine that prime high quality state GO bonds now current a sexy risk-return tradeoff for long-term buyers,” McNamara wrote.
The report additionally highlighted states like California, Texas and Washington, the place buyers within the prime tax bracket can reap yields starting from 8% to 10% for long-maturity, general-obligation debt.
For New Jersey, UBS strategists recommended bonds within the 15- to 21-year maturity vary.
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