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Thursday, November 8, 2018 |
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MANAGING DIRECTOR: |
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US Treasury Market |
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| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 11/1/18 | 2.21 | 2.32 | 2.49 | 2.67 | 2.84 | 2.91 | 2.96 | 3.06 | 3.14 | 3.29 | 3.38 |
| 11/2/18 | 2.19 | 2.33 | 2.50 | 2.70 | 2.91 | 2.98 | 3.04 | 3.13 | 3.22 | 3.37 | 3.46 |
| 11/5/18 | 2.20 | 2.36 | 2.51 | 2.71 | 2.91 | 2.99 | 3.03 | 3.12 | 3.20 | 3.34 | 3.43 |
| 11/6/18 | 2.23 | 2.35 | 2.52 | 2.72 | 2.93 | 3.01 | 3.05 | 3.14 | 3.22 | 3.35 | 3.43 |
| 11/7/18 | 2.23 | 2.37 | 2.51 | 2.74 | 2.96 | 3.03 | 3.07 | 3.15 | 3.22 | 3.35 | 3.43 |
Source: U.S. Department of the Treasury, as of 11/7/2018
A “TEY” REFRESHER
When buying taxfree securities, investors must calculate the Taxable Equivalent Yield of the taxfree bond they’re considering. With this measuring stick, the bond can be reasonably compared to fully taxable bonds.
The cited nominal yield for any taxfree bond is the pretax or “raw” yield. This is the starting point from which investors will determine the TEY, which will be impacted by each investor’s particular tax status. This varies depending on tax brackets, TEFRA penalties (for bank qualified bonds), Alternative Minimum Tax (AMT) features and a handful of other variables.
Your Country Club Bank Capital Markets representative is happy to perform those calculations as you compare municipal investments to taxable investments in pursuit of the best fit for your particular needs.
Using current issues we are bidding or spying in the larger marketplace, examples of this calculation are illustrated below (the math: divide the taxfree rate by the reciprocal of the tax bracket).
NON-BQ:
AA- City of Derby, Kansas GO Bonds (Proposed)
520M 12-1-2019 @ 2.05%
615M 12-1-2024 @ 2.55%
BQ (Assuming 10 b.p. “TEFRA” penalty):
Aaa 80M Outagamie County, WI 3.00% 11-01-24 Non-Callable @ 2.55%
The above are simply representative offerings. There are many more that could satisfy your specific maturity and yield needs.
When buying taxfree securities, investors must calculate the Taxable Equivalent Yield of the taxfree bond they’re considering. With this measuring stick, the bond can be reasonably compared to fully taxable bonds.
The cited nominal yield for any taxfree bond is the pretax or “raw” yield. This is the starting point from which investors will determine the TEY, which will be impacted by each investor’s particular tax status. This varies depending on tax brackets, TEFRA penalties (for bank qualified bonds), Alternative Minimum Tax (AMT) features and a handful of other variables.
Your Country Club Bank Capital Markets representative is happy to perform those calculations as you compare municipal investments to taxable investments in pursuit of the best fit for your particular needs.
Using current issues we are bidding or spying in the larger marketplace, examples of this calculation are illustrated below (the math: divide the taxfree rate by the reciprocal of the tax bracket).
NON-BQ:
AA- City of Derby, Kansas GO Bonds (Proposed)
520M 12-1-2019 @ 2.05%
615M 12-1-2024 @ 2.55%
BQ (Assuming 10 b.p. “TEFRA” penalty):
Aaa 80M Outagamie County, WI 3.00% 11-01-24 Non-Callable @ 2.55%
The above are simply representative offerings. There are many more that could satisfy your specific maturity and yield needs.
This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.
•Not FDIC Insured •No Bank Guarantee •May Lose Value