Demand For Bond Market In California
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A Bond is a document with which one party promises to pay another within a specified amount of time. The term "demand" means that the principal plus any interest is due on demand by the bondholder rather than on a specific date. Bonds are used for many things, including borrowing money or guaranteeing payment of money. A bond can be given to secure performance of particular obligations, including the payment of money, or for purposes of indemnification. The validity of a "private" bond, payable upon demand, is determined by the same principles applicable to contracts generally. The purpose of the bond must not be contrary to public policy; it must be supported by a valuable consideration; and there must be a clear designation of the obligor and the obligee. A bond procured through fraud or duress may be unenforceable, but mistake on the part of the obligor as to the contents of a bond, or its legal effect, is not a defense to enforcement of the bond.
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Strong retail demand for California bonds has resulted in tight credit spreads, which are currently not reflecting the fundamental picture. Municipal bonds currently offer higher yields and an attractive riskreturn profile.Taxexempt California municipal bonds may provide some relief to Golden State investors faced with the highest income tax rates in the nation. Policy change, limited supply and strong demand for high yield municipal bonds may adversely impact you or your clients' financial position. As demand for bonds increases, so do bond prices and bondholder returns.
