Bill Gross, who runs the world's largest mutual fund in the world PIMCO Total Return, which could now include up to 10% in preferred stock and convertible bonds, thinks some municipal bond yields are decent on a risk/reward basis. For example, 6.65% on New York City Build America Bonds and 7%+ in California. Again, just like commercial real estate (cap rates), how do you price in interest rate risk for Treasury yields going forward? Will the 10-year Treasury yield stay between 2-4% during the next 5-10 years? If tax rates rise significantly to fund our Nation's expenditures, is that the true alpha? Based on tax base/revenue risk though, it's a Muni pickers market imho. Have we seen the worst yet of the muni carnage? See the CNBC video after the jump.
Source: http://www.cnbc.com/id/15840232?video=1713800375&play=1 (12/28/2010)
Related: Meredith Whitney Talks Munis On CNBC After 60 Minutes Interview (12/21/2010)