Salient to Investors:

Bill Black at Invesco says if Prop 29 passes, other states will raise their tobacco taxes, with significant impact on tobacco bond yields. California accounts for $28 billion of $102 billion of tobacco securities – tobacco securities haven’t beaten the market since 2009. Each 10 percent increase in tobacco prices reduces smoking rates by 4 percent.

California has the second-lowest proportion of smokers of any state, 12.8 percent, compared with 20.6 percent of adults nationwide. Richard Larkin at Herbert J. Sims & Co. said Prop 29 passing could decrease smoking by 10 percent in the state and 2 percent nationally.

Janney Montgomery Scott said cigarette consumption fell 3 percent in 2011, the smallest drop since 2006, and is down to less than 300 billion in 2011 from a peak of 640 billion cigarettes in 1981.

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