Search results
Results from the WOW.Com Content Network
These funds invest at least 80 percent of assets in municipal bonds, and, as we discussed earlier, interest income from municipal bonds is generally exempt from federal income tax. Examples of tax ...
For example, assume an investor in the 38% tax bracket is offered a municipal bond that has a tax-exempt yield of 1.0%. Using the formula above, the municipal bond's taxable equivalent yield is 1.6% (0.01/(1-0.38) = 0.016) - a figure which can be fairly compared to yields on taxable investments such as corporate or U.S. Treasury bonds for ...
Municipal bond arbitrage, also called municipal bond relative value arbitrage, municipal arbitrage, or just muni arb, generally consists of building a leveraged portfolio of high-quality, tax-exempt municipal bonds and simultaneously hedging the duration risk in that municipal bond portfolio by shorting the equivalent taxable corporate bonds.
That perception could thus potentially allow a local government to borrow at a lower interest rate, saving its taxpayers' money over the life of the bonds. Despite that advantage, many states, such as California under Proposition 13, do not allow local governments to issue unlimited-tax general obligation debt without a public vote.
Interest income from Treasury bonds is subject to federal income tax but exempt from state and local taxes. This exemption can be particularly beneficial for investors in high-tax states.
For example, imagine you pay federal tax at a 24 percent rate and state tax at a rate of 6 percent, and the municipal bond offers a yield of 3 percent.
The sponsoring government is not responsible for bond repayment and the bonds do not affect the government’s credit rating. IRBs are desired as the private business receives a lower interest rate (due to the bonds tax-exempt status), a property tax exemption, and a long-term, fixed rate financing package. [1]
DCM Advisors' Marc Rappaport tells Yahoo Finance's On the Move most people haven't figured out the buying opportunity in taxable municipal bonds yet.