NYC High-Income Residents May Benefit From Tax-Exempt Municipal Bonds, Strategists Suggest By

Bank of America (NYSE:) strategists, Yingchen Li and Ian Rogow, suggested on Friday that high-income residents of New York City might find a greater advantage in investing in the city’s tax-exempt municipal bonds over high-yield corporate bonds. The strategists argued that due to the city income tax, taxable bonds would require a yield of 9.68% to compete with municipal bonds.

The $4 trillion municipal bond market has seen an upswing in yields recently, a trend that the Federal Reserve’s aggressive rate hikes have further amplified. These hikes were implemented in response to concerns about inflation. The yield surge is also evident in the 10-year AAA municipal benchmark, according to data from Bloomberg BVAL. This rise contrasts with the performance of the Bloomberg high-yield index.

The strategists’ suggestion comes at a time when investors are seeking safe havens amid economic uncertainties and inflationary pressures. The tax-exempt status of municipal bonds combined with their increasing yields could make them an attractive option for high-income individuals looking for investment opportunities.

In the same vein, investors may also want to consider the potential benefits of investing in stocks that have shown consistent performance over time. For instance, TFI, a company with a market cap of 3400M USD, has maintained dividend payments for 17 consecutive years, according to InvestingPro data. Although the company’s stock is currently trading near its 52-week low, its RSI suggests that it is in oversold territory, which might signal a potential upward movement in the future.

Moreover, in the past year, TFI has provided a total return of 1.69%, despite a recent downturn in performance, as indicated by the 1 Month Price Total Return of -3.39% and the 3 Month Price Total Return of -4.8%. Despite its weak gross profit margins and poor free cash flow yield, as highlighted in the InvestingPro Tips, the company’s steady dividend payments and low price volatility could make it a viable option for investors seeking stable returns in the long term.

For more insights and tips like these, consider subscribing to InvestingPro, which offers a wealth of information and valuable tips for investors. You can access additional tips and real-time metrics for various companies at InvestingPro.

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