Making Cents: An Attractive Tax-Equivalent Yield
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A large issue of two-year municipal bonds in California sold at a yield of 4.2% this past week. For anyone near the top tax brackets, that’s quite a deal: An 8.2% tax-equivalent yield. By comparison, a two-year treasury note yielded just under 6%. Although the treasury note is exempt from state taxes, municipal debt is still at a larger-than-usual spread above other yields.
