With US Treasury rates (US Treasury Rates as of Sept 5) so low, investors often look to municipal bonds for higher yield.
Term | Current Yield | 28% Taxable Equivalent Yield (note 1) |
2-Year | 0.83% | 1.15% |
5-Year | 1.86% | 2.58% |
7-Year | 2.42% | 3.36% |
10-Year | 3.20% | 4.44% |
15-Year | 3.89% | 5.40% |
20-Year | 4.21% | 5.85% |
30-Year | 4.62% | 6.42% |
Investors give up some safety because municipalities can not print money. If they go bankrupt, you can lose everything!
To get our current recommendation (pg 5 of the September issue) for municipal bonds, subscribe to The Retirement Advisor Now!
Note 1: “Taxable equivalent yield” is the “tax-free rate” divided by “one minus your federal tax bracket.” For example, if you are in the 28% tax bracket and can get a AAA rated GO bond paying 3.20% this is equivalent to getting 4.44% in a fully taxable AAA rated bond. [ 3.20% / (1 – 0.28) = 4.44% ]
To get our current recommendation (pg 5 of the September issue) for municipal bonds, subscribe to The Retirement Advisor Now!
Note 1: “Taxable equivalent yield” is the “tax-free rate” divided by “one minus your federal tax bracket.” For example, if you are in the 28% tax bracket and can get a AAA rated GO bond paying 3.20% this is equivalent to getting 4.44% in a fully taxable AAA rated bond. [ 3.20% / (1 – 0.28) = 4.44% ]
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