Muni Bond Yields Going up

[william the wie]

The reason for putting this subject in politics is that munis are exempt from federal income tax and usually state income tax so states like FL and TX that have no state income tax normally pay higher yields than states that do have income taxes. But that difference has financed much larger borrowing and borrowing costs in the mostly blue states with noticeable state income taxes and growing tax flight. The government shut down is driving the yield on the benchmark 10 year treasury up. Treasury yields are exempt from state income tax. Rising state taxes and shrinking state tax bases means that ever shorter maturity bonds are still around the corner default. When yields on TX and FL munis start moving towards the yield of say NJ or RI panic and bug out boogie among the wealthy will be seen.

 

[DarkFury]

You could not give me a blue state muni right now. The first huge wave of state employees who are retired arrive shortly after Gov Brown leaves office. And that wave is due to get very large as it baby boomers retirement. Pension rolls are expecting a 15% yearly increase topping out at 20% for those born 58 to 68.

You take their pensions debt load and divide it among fewer tax payers and it's all down hill.

 

[william the wie]

This is going to get nasty very fast. I hope you have plenty of insurance on your blue state properties. fire season on the left coast will become year round this year even with favorable weather.

 

[DarkFury]

This is going to get nasty very fast. I hope you have plenty of insurance on your blue state properties. fire season on the left coast will become year round this year even with favorable weather.

How many homes and companies will burn because they are to upside down? Arson goes up when business goes bad.

 

[my2¢]

I'm not into muni bonds. Are they sure it is the government shutdown the is driving yields up or simply the fact that with tax reform, there is less of a need to shelter income? Not a rhetoric question or me trying to make any point, I've held many investments over my life but never a muni. Never been in an income tax bracket where I've had the need.

I found this interesting. State credit ratings - Ballotpedia
Poor Illinois.

 

[william the wie]

I'm not into muni bonds. Are they sure it is the government shutdown the is driving yields up or simply the fact that with tax reform, there is less of a need to shelter income? Not a rhetoric question or me trying to make any point, I've held many investments over my life but never a muni. Never been in an income tax bracket where I've had the need.

I found this interesting. State credit ratings - Ballotpedia
Poor Illinois.

Not just the two causes you mention:

wage push inflation has appeared already

GDP is breaking out to the upside

The trade balance is getting better and high cost but not high end housing as in the blue wall is pretty much unsalable. Arson will get very common in Blue states. higher corporate taxes means that job creation in the blue states will pretty much end while taking off in the red edge.

 

[BluesLegend]

Its time to cash out and get out of blue states.

 

[william the wie]

Its time to cash out and get out of blue states.

Yes, default could happen at any time.