Eric Kazatsky highlights municipal bonds as a tax-advantaged income source amidst rising U.S. Treasury yields
Investors are increasingly exploring alternative income sources as U.S. Treasury yields reach multi-year highs, currently approaching 4.9%. While rising yields provide a dependable income stream and a cushion against inflation, they also create market volatility and higher borrowing costs for homeowners. Eric Kazatsky, managing director and client portfolio manager at MacKay Shield, notes that municipal bonds offer a significant tax advantage, serving as a "tax haven" for wealthy investors. These bonds are often not subject to income tax, making them a more efficient way to earn guaranteed income compared to taxable U.S. Treasury bonds. Kazatsky also highlights that municipal bonds have historically shown lower default rates than corporate bonds during major financial crises. To diversify, many investors are shifting toward lower-duration alternatives and other non-fixed income products. These include insurance-linked securities, dividend-paying stocks, real estate investment trusts, and merger arbitrage. These strategies allow investors to seek yield outside of traditional bond categories while managing risk and inflation exposure.
Sources
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Where investors are finding income outside traditional bonds as brutal drawdown drags on
CNBC
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Why Higher Bond Yields Can Be ‘a Great Thing’
Morningstar
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I just got a $10K bonus and wondered if I should put it in bonds, but the news paints a varied picture on yields
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