Inflation Isn’t All Bad for Tobacco Bonds Battered by Selloff
- Illinois settlement, inflation boost payouts to $7.3 billion
- About $90 billion muni bonds are backed by settlement payments
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There’s a little bit of good news for tobacco municipal-bond investors who have been battered by the market sell-off. The inflation that fueled the rout to begin with is, in a fortunate twist, boosting the revenue backing their holdings.
Payments to U.S. states this year under a 1998 national settlement with major tobacco companies rose by 10%, despite a decline in cigarette sales, according to figures disclosed late last month by the National Association of Attorneys General. That’s in part because under the settlement, the companies have to increase their annual payments to adjust for inflation.