Monday, January 17, 2011

Rosie Likes Munis

From Rosie's latest:

First, even if you buy into the default talk, look at the yield protection you get now. There are some long-term muni’s trading north of eight percent ― even higher than junk bonds (a premium of over 100bps!). Long-term AAA-rated muni’s are now trading well north of five percent or 116% vis-a-vis Treasury bonds (typically, muni bond yields are equivalent to 82% of Treasury yields given their tax advantage). California off-the-run 30-year 6% bonds are now being quoted at a yield premium to dollar-denominated debts offered by the likes of Mexico and Columbia.

Even in California, only teachers come in front of bond holders. In other states, the debt holders are the first to get paid.

Give me a giant break.

Even in California, only teachers come in front of bond holders. In other states, the debt holders are the first to get paid. It’s amazing how few people know that.
Wow! That really is crazy if CA yields are higher than banana republics'. As far as I know, California has never defaulted (though other states have!).

1 comment:

Taylor Conant said...

CP,

Then again, demographically California is, in many ways, Mexico.