California May Issue I.O.U.'s Again, Bond Ratings to Get Clobbered
According to municipalbonds.com, current yields on California debt ranges anywhere from the low 4% to mid 7%, and the curve on this debt is realatively flat, with only a gradual increase. Why haven't yields exploded and the curve steepened is beyond us. This is the exact kind of apathy that is common before investment instruments like these implode.
But what happens to the California economy as austerity measures continue? In a government based economy, things will continue to slow. Watch employment to continue to rise and the yield curve should continue to steepen as risk is priced in.
