Are California’s Muni Bonds Mispriced?
California is broke, yet their muni bonds are still priced as though they are a higher rated credit. State tax revenues are rapidly declining as corporate and individual taxes are falling. Muni bonds could be one of the next shoes to drop. Watch the prices carefully. I’d seriously consider lightening up on muni holdings as the states are about to experience a TSUNAMI of bad news related to their debt holdings. Fidelity’s CA muni bond fund is trading about $.30 off of the all time high price. Either they’re doing a tremendous job on the portfolio or the bonds are mispriced.
