Municipal Bond Forum
California expected to honor its debt obligations
Q
I live in California and all of my investments, $400,000, are in long-term California muni bonds for income and easy transfer to my daughter. I’m concerned that all of my eggs are in the basket of California. Should I spread my bond purchases into other states in case California runs into financial difficulties?
A
James A. Klotz responds:
We expect California to be able to honor its bonded debt responsibilities. Under the state Constitution, this obligation ranks second only to education as a payment priority.
California state taxes are very high on out-of-state bonds. Your alternatives would be U.S. territories such as Puerto Rico, etc.
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