You can sink your teeth into today’s yields. But when you run your finger along the yield curve, remember to consider your peace of mind and safety when times get rough. Because they can get rough.

Ask yourself where your bonds fit in the capital structure. When it comes to paying investors, your position as a bondholder is higher in the capital structure than that of common shareholders. Yes, yield matters, but so does getting paid.

I’m thinking about this as investors in high-tax states are snapping up municipal bonds. I am cautious about the move because there’s a Grand Canyon-sized difference in how various states do business today.

For example, who do you think guys like Mamdani are going to pay when the you-know-what hits the fan? The investor class? Doubt it.

I view this much like the government bailout of GM, in which investors were left hanging out to dry. It’s not likely to happen—until it does. Don’t let taxes wag the dog.

Action Line: Focus on quality first, then yield, and be cautious about the future. When you want to talk about bonds in your portfolio, email me at ejsmith@yoursurvivalguy.com.

Originally posted on Your Survival Guy.