High Grade High Tax States

Description

The High Grade High Tax States curve is calculated based on trades of municipal bonds (excluding California bonds) categorized within the following Bond Types:

• High Grade bonds that have a rating between AAA and AA+, even if the stated rating is lower due to an enhancer downgrade. Likewise, we apply a minimum underlying rating test of at least composite A+ for enhanced bonds.

• The High State Tax Rate group includes states with a minimum income tax rate of 7.75%, treat in-state bond interest as exempt and tax out-of-state bond interest. We exclude California from this group as we treat it uniquely through its own curves. This group includes a composite of general obligation and revenue bonds.

• Use of Proceeds may include airports, electric and public power, higher education and sewer to name a few. Because our focus is on higher quality bonds, we generally limit the “use of proceeds” types to those that would qualify as general purpose and utility uses.

While not atttempting to define the absolute minimum yields of the municipal market we do seek to provide an accurate reflection of the yields of high grade bonds from states with high tax rates.

The Bond Type Curve scale shown above represents the yield on the curve at the same date as the date of the curve calculation for each year of effective maturity.  As an example, for a curve calculated on April 16th of the present year the scale would reflect the yield point of April 16 for each year of effective maturity.  In this way, the scale always represents a constant maturity of T+365 day increments for each year of effective maturity.

Summary of Methodology

Bond Type Curves are constructed from the prior day's trades as reported through the Municipal Securities Rulemaking Board. Using proprietary technology, BondWave analyzes the trades and categorizes them according to their constituent attributes, which we call Bond Types. Each curve represents only those trades that meet the specific combination of Bond Type criteria embodied in the curve definition. This capability allows us to assemble the specific trades that fit each curve definition and examine the yield information in order to calculate empirically-derived yield curves. For more information on this process, visit the Bond Type Curve Methodology page.

Legal Information

Please be advised that the yields reflected are only presented to provide an indication of the bond market on the date specified and are not indicative of the expertise of BondWave or any recommendations provided by BondWave. The yields are not indicative of yields received by accounts managed by BondWave or of advice BondWave has provided. The yields do not take into account any fees charged by an individual client’s investment adviser. Any such fees would reduce the performance of a client’s portfolio.

Because the yields are based only upon the municipal securities that traded over the applicable period and that were reported through the MSRB system, such yields may not be indicative of what is currently available in the marketplace or the yields of other municipal securities that did not trade on such dates. Municipal yields are based in part on certain assumptions and as a result, an investment in such securities may not result in performance comparable to the quoted yields. Past performance is not necessarily indicative of future results.