• Lance

Double Your Yield with an NYC bond

Updated: Sep 23, 2021

Arthur's Weekly Bond


How is this possible?


In a low-interest-rate environment, it's hard finding any decent yields. Today's popular iShares National Municipal Bond ETF MUB yields roughly 0.7%.


We searched and picked out a hidden gem for you. The NYC Transitional Finance Authority ("NYC TFA") issued this bond. This bond yields 1.7%; this is double the ETF.


Additionally, it's both state and federal tax-exempt. So, if you are a New York City resident, your actual taxable yield could be as high as 3.6%, which is equivalent yield to investing in high-yield corporate debt.


Furthermore, NYC TFA has never defaulted on its obligations and is highly rated by the major credit rating agencies. This bond could be perfect for a buy-and-hold investor.


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FAQ


Why should I care?

This bond is yielding double your average municipal ETF. As a result, it can be an excellent buy-and-hold play.

What are the positive qualities of this bond?

There are two positive qualities to highlight. NYC TFA has been raising money since the 1990s without any issues. The second is that the bond is highly rated by the major credit rating agencies. The agencies are saying that there is a highly likelihood of getting your money back.

What are the risks?

The maturity of the bond is very long. The bond matures in 2045. While you can trade the bond before 2045, this bond will be subject to interest rate risk. This means if the interest rate

What is the NYC TFA?

They are a public benefit corporation whose primary focus is to finance a portion of NYC's improvement plans. They have been around since 1997.

What is the use of funds?

The funds are used to finance New York City's general capital expenditures. On their website, NYC TFA highlights how some of those funds were used to help rebuild the World Trade Center area after September 11th, and other funds were used in the past to improve school facilities.


What have they done in the past?

In 2001, NYC TFA raised close to $1 billion to pay for the costs related to the 9/11 World Trade Center attack. In 2009, NYC TFA raised close to $100 million to finance the city's school buildings.


Are there any tax advantages?

The bond is federal, state, and city tax-exempt. Remember that we are not giving you tax advice.


Bond Facts


References

More detail about the bond: https://emma.msrb.org/Security/Details/A9A19C8CBB5365BD439FB4019A14F298E#


Legal bond agreement ("Official Statement"):

https://emma.msrb.org/SS1382025-SS1076019-SS1483412.pdf


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