Should i buy california bonds

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Brought to You by Mitre Media. The Top 10 Safest Municipal Bonds. How do Municipal Bonds Work? Accrued Interest: Definition, Formula, and Example. General Obligation vs. Revenue Bonds: A MunicipalBonds. Treasury bonds, which are subject to federal income taxes. But you need to use a careful strategy to avoid two important risks. Palumbo recommends avoiding concentration in the municipal bonds of a single state, even if you are living in one with very high income taxes, such as New York or California.

So go with a varied portfolio from many states, be content to avoid federal income taxes and tolerate state income taxes. First, a few definitions. A bond is issued at its face value, which is called par. The interest rate is called the coupon. The sample bond matures in 10 years. Most bonds also have earlier call dates, when the issuer can redeem the bond for at least face value.

After a bond is issued and purchased by an investor, it can be sold on the open market at any time. But its market value will fluctuate. If you buy a bond at a premium or a discount to face value, your current yield is not the coupon. It is the annual coupon payment divided by the price you pay for the bond. It may be well worth taking that eventual loss to get an attractive yield.

Those compare quite favorably with the yield on year U. Looking at corporate bonds, the Bloomberg Barclays U. Aggregate Bond Index has a yield to worst of only 1.

So even before considering the tax advantages, the muni yields are higher. For comparisons of yields for municipal bonds and taxable bonds, you can calculate a taxable-equivalent yield for the muni by dividing its yield by 1 minus your highest graduated tax rate.

Even in the lowest tax bracket, the municipal bond yields are very attractive against investment-grade corporate bonds and year U. Treasury notes. Bond Ratings 1 of 2. General Obligation Moody's Aa2. Fitch AA. Fitch AA-. Bonds 3. Contact Us. State of California. Fiona Ma , State Treasurer. University of California. Bonds Get an overview of our bonds and ratings Bond Sales View upcoming bond sales Roadshows Watch roadshow presentations Ratings View credit agency ratings.

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