States are not allowed to tax income earned from Federal bonds. CA says this in https://www.ftb.ca.gov/forms/2017/17_1001.pdf page 5
Federal law requires the interest earned on federal bonds (U.S.
obligations) to be included in gross income. California does not
tax this interest income. The following are not considered U.S.
obligations for California purposes: Federal National Mortgage
Association (Fannie Mae); Government National Mortgage
Association (Ginnie Mae); or Federal Home Loan Mortgage
Corporation (Freddie Mac).
