Muni Bond Yields Hit a Sweet Spot for Tax-Savvy Investors
Tax-equivalent muni yields have surged vs. corporate bonds. Here's why you should move before the window closes.
If you've been sleeping on municipal bonds, wake up. Over the past two months, tax-equivalent yields on munis have blown out dramatically compared to corporate bonds — and that gap is your opportunity.
Here's the simple math: muni bond interest is exempt from federal taxes, and often state taxes too. When you adjust for that benefit, the effective yield you pocket can crush what a comparable corporate bond hands you after Uncle Sam takes his cut. That spread has widened sharply, meaning munis are offering rare relative value right now.
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This kind of dislocation doesn't hang around forever. When institutional money notices — and it always does — demand floods back in, prices rise, and yields compress. The traders who positioned early collect the premium. The ones who waited read about it later.
Who benefits most? The higher your marginal tax bracket, the more powerful the tax exemption becomes. If you're in the 32% bracket or above, the taxable-equivalent yield math gets very compelling very fast. Even at lower brackets, the current spread is wide enough to deserve a hard look.
Don't overthink the entry. The signal is already flashing. Continue reading at MarketWatch.com.
