Bank of America Corp (NYSE:BAC). strategists Yingchen Li and Ian Rogow have suggested that wealthy New Yorkers may find more returns in municipal bonds than corporate debt. The recommendation comes amid the Federal Reserve's measures to combat inflation, which have led to higher yields in the $4 trillion tax-exempt municipal bond market.
The Federal Reserve's ongoing commitment to maintaining high interest rates has prompted an increase in the 10-year AAA municipal benchmark, according to Bloomberg BVAL data. This rise is a result of the Fed's strategy to counter inflation, which has increased yields in the municipal bond market.
Li and Rogow used the ICE BofA corporate bond index for comparison to illustrate this trend. Given the city income tax, taxable bonds would need a yield of 9.68% to compete with municipal bonds. This suggests that municipal bonds could be a more attractive investment option for those in high tax brackets.
The strategists' observations underscore the potential of municipal bonds as a viable investment alternative for wealthy individuals in New York. This comes at a time when investors are navigating through an economic environment characterized by inflationary pressures and high-interest rates.
In addition, the Bank of America Corp., a prominent player in the Banks industry according to InvestingPro Tips, has shown a consistent revenue growth, which has been accelerating. The company has also maintained its dividend payments for 53 consecutive years, making it a reliable choice for investors looking for consistent returns. The bank's market cap stands at 217.09B USD, and it has a P/E ratio of 7.82, indicating that it's trading at a low P/E ratio relative to near-term earnings growth.
As per InvestingPro Data, the company's revenue growth for the last twelve months (LTM2023.Q2) is 5.63%, and its quarterly revenue growth for FY2023.Q2 is 8.6%. These figures add to the company's appeal as a stable investment option. The bank's dividend yield as of Y2023.D272 is 3.48%, with a dividend growth of 14.29% in LTM2023.Q2, reinforcing its reputation as a reliable dividend payer.
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