| Wednesday, August 2, 2023 |
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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 |
| 07/26/23 | 5.37 | 5.43 | 5.50 | 5.37 | 4.85 | 4.49 | 4.12 | 4.00 | 3.87 | 4.13 | 3.94 |
| 07/27/23 | 5.35 | 5.43 | 5.50 | 5.39 | 4.93 | 4.58 | 4.24 | 4.14 | 4.00 | 4.25 | 4.04 |
| 07/28/23 | 5.35 | 5.42 | 5.48 | 5.37 | 4.88 | 4.52 | 4.18 | 4.08 | 3.95 | 4.22 | 4.01 |
| 07/31/23 | 5.36 | 5.42 | 5.47 | 5.39 | 4.88 | 4.53 | 4.18 | 4.08 | 3.96 | 4.21 | 4.01 |
| 08/01/23 | 5.37 | 5.41 | 5.49 | 5.38 | 4.90 | 4.57 | 4.22 | 4.12 | 4.03 | 4.30 | 4.10 |
The data in the table above is static as of the time it was pulled, so rates may have changed. Treat all data in this table and PMR as indications only and availability is always subject to change.
This information was pulled manually from sources we believe to be reliable. New source, as of 12/12/2022, Bloomberg, L.L.P. As of: close of business 8/01/2023
Taxes on Tax Exempts?
After a rapid rise in interest rates over the last year paired with banks recently looking to raise funds by way of their bond portfolio, it could be a good idea to get reacquainted with the details of the IRS’s de minimis rule.
Municipal bonds being purchased or sold in the secondary market at a price lower than where they were originally issued is where this could be applicable. The rule determines whether the price appreciation (or accretion) of a bond purchased at a discount will be taxed at the ordinary income tax rate, or if it will be taxed at the capital gains tax rate. Generally, if the discount falls within a specified de minimis threshold (0.25% X years to maturity), it is deemed to be too small to be treated as a market discount, so capital gains will only apply. But if it exceeds the threshold, ordinary income taxes apply.
In this case we will look at an offering for a C-Corp investor (no capital gains) and a 21% ordinary income tax bracket applies for both the true yield and the taxable equivalent yield.
The difference between the original issue price and the current offering price would be treated as ordinary income. Taking this into consideration, the true yield should be the advertised offering yield as well as the yield used to calculate the taxable equivalent yield.
The pre-de minimis offering level is 3.65% YTM / 5.33% YTC but the true tax free yields after taxes are
3.55% YTM / 5.23% YTC.
When selling bonds from your portfolio, lower coupon bonds are likely to be affected by this as the buyer on the other side of the transaction will be taking this tax into consideration when they provide a bid.
This should be discussed with your accountant as C-Corp’s and S-Corp’s will be impacted differently. Please let us know how we can help.
Municipal bonds being purchased or sold in the secondary market at a price lower than where
In this case we will look at an offering for a C-Corp investor (no capital gains) and a 21% ordinary income tax bracket applies for both the true yield and the taxable equivalent yield.
The difference between the original issue price and the current offering price would be treated as ordinary income. Taking this into consideration, the true yield should be the advertised offering yield as well as the yield used to calculate the taxable equivalent yield.
The pre-de minimis offering level is 3.65% YTM / 5.33% YTC but the true tax free yields after taxes are
3.55% YTM / 5.23% YTC.
When selling bonds from your portfolio, lower coupon bonds are likely to be affected by this as the buyer on the other side of the transaction will be taking this tax into consideration when they provide a bid.
This should be discussed with your accountant as C-Corp’s and S-Corp’s will be impacted differently. Please let us know how we can help.
Source: MSRB
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.
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