We recommended sale of California GOs when they were trading with twenty basis point more yield than the Lynch Scale.

The2004 - 2006 maturities now trade with 25 basis points more yield 2007-2014 with 40 basis points more yield. 2015 with 45 basis points more, 2024 - 2033 with 50 basis points more.

We expect the yields on California GOs to continue to increase in yield versus the Lynch Scale.We would avoid purchase at these levels and sell at least some GOs if your portfolio is comprised of only California GO issues.

Sell 100% (up from 50%) of all Massachusetts GOs five years and longer.
Sell 100% of Boston GOs 5 years and longer

Sell Nevada GOs maturing in five years or longer .
Sell all Las Vegas GOs

Sell all New Jersey GOs five years and longer. We recommended sale when yields were the same as the Lynch Scale. Now New Jersey GO yields 10 basis points more than the scale. We expect the spread to continue to widen.

We recommended sale of New York City GOs in our July 2001 publication when they were yielding 10 to 15 basis points more yield than the Lynch Scale.

Now NYC GOs yield 75 basis points more than the Lynch Scale in 2004-20.06; 85 basis more 2007-14; 90 basis points more 2015-23 and 85-90 BP in 2023-33.

We have yet to see any rational plan to bail the New York City out. NY State has huge budget problems, as does the Federal Government. We would continue to sell or certainly avoid investing in NYC GOs.

Sell all Tennessee GOs 2005 (down from 2008) and longer.

NOTE: Our sale recommendations do not take into account your individual tax situation. Check with your accountant. That said these recommendations are based upon our belief that these particular municipal bond issuers are overpriced considering the risks inherent in their economic and financial situations. Further we expect interest rates to go higher. The combination of a declining financial situation and higher interest rates will enable investors to buy these bonds back, down the road, at lower prices and higher yields.

This page © 2003 Lynch Municipal Bond Advisory