What You Have to Know
- In states like California and Texas, traders within the prime tax bracket can reap yields starting from 8% to 10%.
UBS Monetary Companies Inc. is urging traders 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.
Robust 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 consumers within the state’s prime tax bracket, in response to a Friday analysis observe by Kathleen McNamara, senior municipal strategist at UBS.
“Given the upper yield setting, we consider that top high quality state GO bonds now current a lovely risk-return tradeoff for long-term traders,” McNamara wrote.
The report additionally highlighted states like California, Texas and Washington, the place traders within the prime tax bracket can reap yields starting from 8% to 10% for long-maturity, general-obligation debt.
For New Jersey, UBS strategists steered bonds within the 15- to 21-year maturity vary.