Golden State Gets Upgrade
U.S. Global Investors
By Frank Holmes
February 8, 2013
The turbulent clouds that settled upon California‚Äôs bond market are beginning to dissipate, as the state‚Äôs general obligation debt was recently upgraded to ‚ÄėA‚Äô by Standards & Poor‚Äôs. It has been almost a year since the rating agency has had a sunny outlook on the Sunshine State, but a series of improving economic data and better fiscal position have been turning things around.
Business Insider‚Äôs slideshow showcases several key factors of how the state ‚Äúcame back from the brink.‚ÄĚ Since bottoming around 2009, payrolls, home prices and economic activity have been increasing in California. Silicon Valley‚Äôs tech area is booming, San Francisco‚Äôs foreclosure rate is ‚Äúone of the lowest in the nation‚ÄĚ and the state has a Democratic supermajority, which may make political gridlock a thing of the past, says the online financial news site.
Governor Jerry Brown‚Äôs proposed budget now includes an $850 million surplus, which is a ‚Äústark contrast‚ÄĚ to previous years when the state saw ‚Äúdeficits in the tens of billions,‚ÄĚ reports the¬†Wall Street Journal.
Last summer, John Derrick, portfolio manager of U.S. Global‚Äôs Near-Term Tax Free Bond Fund (NEARX) and Tax Free Bond Fund (USUTX) said that¬†municipalities were as resilient¬†as they have historically been, and S&P‚Äôs recent rating release gives further credence to that opinion. We believe Cali‚Äôs improvement is positive for bond investors, as the upgrade means there will likely be greater confidence in the state‚Äôs bonds.
In a diversified portfolio, municipal bonds remain a worthy investment. For those trying to minimize taxes, muni bonds are especially attractive in a taxable account, as they are free from state and federal taxes and offer attractive yields in a low rate environment.¬†Find out which bond fund is right for you.
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