Short Term Municipal Bonds v. Certificates of Deposit (CDs)
- I’m keeping an eye on this trend: taxable CD rates, as measured by the Crane CD Indexes have yields higher than AAA municipal bond yields including municipal Taxable Equivalent Yields (TEY) for most tax brackets.
- The bright spot on the curve is at the one year mark. AAA muni yields at the one year mark and only for the highest tax brackets show an incremental value over taxable CDs.
- At the two year, three year and five year points on the curve, AAA muni yields just are too low to compete v. taxable CDs even the highest tax brackets.
AAA Municipal Bond Yields & Taxable Equivalent Yields v.
Certificates of Deposit
Sources: IHS Markit (Municipal bond yields) and Crane Data (Crane CD Indexes). Chart is provided for illustrative purposes only. Past performance is not a guarantee of future results. TEY = Taxable Equivalent Yield calculated at assumed tax rates indicated. Data as of 4/26/2019.
Data Resources Used in this Report:
- Taxable Equivalent Yield = Tax Exempt Yield / (1 – Federal Tax Rate)
- 2019 tax brackets, however not all tax brackets are represented herein
- End of day yields are used
- At the time of this writing, JR Rieger owns individual municipal bonds and a municipal bond fund.
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