I’d buy California PIMCO muni bond funds that yield 5.4% tax free. Not much risk holding both to maturity. For $200k worth that’s about an arbitrage gain of 4800 a year tax free for 10 years.
Now that was my plan last year that fell through because the overwhelmed IRS couldn’t find my corporate tax return that had been filed months prior. (The IRS is an understaffed mess, I filed my personal taxes and Cal corporate taxes the same day and they all arrived fine).
If I had done it then, I’d have cash locked in at 1.8 or 2% for 15 years invested at more like 4%, but would have suffered an unrealized loss as the funds dropped.
So certainly there is risk. But it seems pretty small overall. I think the muni tax adjusted yield spread over federal bonds is just insanely high and will eventually drop, especially as supply comes down, which is rapidly happening. The unleveraged and conservative vanguard long muni fund yields 2.8% free of state and federal taxes!
