AAA Municipal Bond Yields vs. U.S. Treasury & Corporate Bonds

AAA Municipal Bond v. U.S. Treasury & Corporate Bonds
June 15, 2018
JR Rieger
jrrieger@yahoo.com | (516) 524-1110 | theriegerreport.com

June 15, 2018
1 (516) 524-1110 jrrieger@yahoo.com | www.theriegerreport.com
6/15/2018
Municipal Bond Market: Key Takeaways
• Nominal yields: Post QE: muni nominal yields now appear rich relative to short term historical pattern. Nominal yields for 20 year
and longer AAA municipal bonds are equal to or are modestly higher than U.S. Treasury bond yields. (Pre QE the muni to treasury
yield ratio was in the 80% - 85% range)
• Taxable equivalent yields:
• In the 0 – 10 year range most Taxable Equivalent Yields (TEY) for AAA municipal bonds still show value for most tax brackets.
• On the longer end of the curve, AAA munis and their TEYs show value for the higher tax brackets(37% and 35%) as those
brackets tend to benefit most from the tax exempt interest.
• Munis v. high quality corporate bonds, such as Apple Inc., AAA muni Taxable Equivalent Yields for the higher tax brackets are
competitive. At lower tax brackets, Apple Inc. bond yields remain relatively favorable in comparison to AAA municipal bonds
yields.
• Bond ETFs:
• The larger investment grade municipal bond ETFs tend to have shorter duration than investment grade corporate bond ETFs
and TEYs that are comparable when using the highest tax bracket (37%).

June 15, 2018
Data as of 6/15/2018. Sources: The Bond Buyer www.bondbuyer.com Data Workstation, MBIS Municipal Yield Curves, U.S.
Department of the Treasury www.treasury.gov. Chart is provided for illustrative purposes only. TEY = Taxable Equivalent Yield.
73%
80%
90%
100%
101%
70%
75%
80%
85%
90%
95%
100%
105%
1.25
1.75
2.25
2.75
3.25
0 5 10 15 20 25 30 35
%ofUSTYield
Yield%
Year
6/15/2018
AAA Municipal Bond Yields v. U.S. Treasury Bond
AAA Muni Yield US Treasury Yield % of UST Yield
Historical Average (Pre Quantitative Easing)

June 15, 2018
1.5
2
2.5
3
3.5
4
4.5
5
5.5
0 5 10 15 20 25 30
Yield%
Year
6/15/2018
AAA Municipal Bond Yields & Taxable Equivalent
Yields v.
Apple Inc. Corporate Bond Yields
AAA Muni Apple Inc. TEY 37% TEY 32% TEY 24% TEY 10%
Data as of 6/15/2018. Sources: Apple Inc. bond yields provided by SQX https://sqx.com/ . Municipal data sourced from the Bond Buyer Data
Workstation www.bondbuyer.com and MBIS Municipal Yield Curves. U.S. Treasury bond yields sourced from U.S. Department of the Treasury
www.treasury.gov. Chart is provided for illustrative purposes only. TEY = Taxable Equivalent Yield.

June 15, 2018
1.5
2
2.5
3
3.5
4
4.5
5
5.5
0 5 10 15 20 25 30
Yield%
Year
6/15/2018
AA Municipal Bond Yields & Taxable Equivalent
Yields v.
Apple Inc. Corporate Bond Yields
AA Muni Apple Inc. TEY 37% TEY 32% TEY 24% TEY 10%
Data as of 6/15/2018. Sources: Apple Inc. bond yields provided by SQX https://sqx.com/ . Municipal data sourced from the Bond Buyer Data
Workstation www.bondbuyer.com and MBIS Municipal Yield Curves. U.S. Treasury bond yields sourced from U.S. Department of the Treasury
www.treasury.gov. Chart is provided for illustrative purposes only. TEY = Taxable Equivalent Yield.

June 15, 2018
6/15/2018
Bond Exchange Traded Funds (a sampling)
• The Larger Investment Grade Municipal Bond ETFs:
• Tend to have shorter durations than larger investment grade corporate bond ETFs. This is a natural reflectiong of the
investment grade municipal bond market – which is currently tracking approximately 2.5 years shorter in duration to
corporate bonds.
• Have comparable Taxable Equivalent Yields (TEYs) relative to investment grade corporate bond ETFs. (When using the highest
tax bracket (37%) in the calculation)
Note: Not all municipal and corporate bond ETFs selected for the example table on page 7.
Data as of 6/15/2018. Sources: VanEck www.vaneck.com, iShares by BlackRock www.ishares.com, The Vanguard Group
www.vanguard.com. Table is provided for illustrative purposes only. Past performance is not a guarantee of future returns. TEY =
Taxable Equivalent Yield calculated at an assumed 37% tax rate.

June 15, 2018
Data as of 6/15/2018. Sources: VanEck www.vaneck.com, iShares by BlackRock www.ishares.com, The Vanguard Group
www.vanguard.com. Table is provided for illustrative purposes only. Past performance is not a guarantee of future returns. TEY =
Taxable Equivalent Yield calculated at an assumed 37% tax rate.
6/15/2018
I.G. Municipal Bond ETFs v. I. G. Corporate Bond ETFs
Intermediate National
Municipal Bond
National Municipal
Bond
National Municipal Bond Intermediate
Corporate Bond
I.G. Corporate Bond
VanEck Vectors AMT-Free
Intermediate Municipal
(ITM)
iShares National
Municipal
(MUB)
Vanguard National
Municipal
(VTEB)
Vanguard
Intermediate-Term
Corporate
(VCIT)
iShares iBoxx
Investment Grade
Corporate
(LQD)
Yield 2.49%
(TEY at 37% = 3.95%)
2.39%
(TEY at 37% = 3.79%)
2.52%
(TEY at 37% = 4%)
4.07% 4.09%
Duration 6.94 5.95 5.6 6.4 8.43
Assets Under
Management
$1.6billion $9.5billion $3.2billion $20.1billion $32.1billion
Management
Fee
24bps 7bps (25bps prior to
18bps in fee wavers until
May 2023)
9bps 7bps 15bps

June 15, 2018
• Municipal bond yields: the Bond Buyer Data Workstation
https://dataworkstation.bondbuyer.com/
• Municipal bond yields: MBIS https://mbis.com/
• Apple Inc. bond yields: SQX https://sqx.com/
• U.S. Treasury bond yields: U.S. Department of Treasury
https://www.treasury.gov
Sources Used in this Report

June 15, 2018
Notes:
• Taxable Equivalent Yield = Tax Exempt Yield / (1 – Federal Tax Rate)
• 2018 tax brackets, however not all tax brackets are represented
herein.
• End of day yields are used.

June 15, 2018
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