The Federal Open Market Committee (FOMC) left the federal funds target range unchanged at 4.25% to 4.50% on Wednesday, January 29, 2025. This breaks the pattern of three rate cuts on 2024.
There is strong growth and a resilient labor market. Inflation has not reached its lower target, but has also not elevated much. There is a lot of uncertainty – when isn’t there – about how Trump’s policy will influence the economy.
Meanwhile, this is a good time to buy bonds. 4% coupons are yielding around 4% – sometimes more, sometimes less, depending on the credit. 5% coupon bonds are plentiful and will goose your cash flow, selling north of $1,070 per bond at a premium.
Housing Bonds
Periodically, we are able to buy AAA tax-free Housing Bonds which have above market returns because THEY ARE CALLABLE AT ANY TIME.
For example, we were able to buy tax-free Housing bonds as a new issue yesterday (1/29/25) for a number of clients.
We received a full allocation of the following tax-free bonds rated Aaa by Moody’s:
Indiana Housing and Community Development Authority, 4.70% coupon due 7/1/55 at par (100).
Since the bonds were sold at par, the y-m, y-c and current yield are all 4.7% tax-free. This is for a high-tax bracket taxpayer, a tax-free equivalent return of in excess of 7% on triple-A bonds.
California Fires
These fires were predictable. The insurance companies knew to terminate their insurance of houses that had rapidly appreciated in value and were vulnerable to predictable Santa Ana winds. Lack of insurance can reverberate across the country. Have you walked around your own property to assess its vulnerabilities?
As wildfires continue in Southern California, we extend our heartfelt sympathy to clients, friends and their communities that are struggling.
P.S. Remember, munis are boring and reliable. Hi quality munis have a strong foundation of support.