The chart provides a compelling comparison of yields in the U.S. municipal bond market as of September 30, 2019. It highlights the tax-equivalent yield advantage of municipal bonds over other investment categories. Notably, high-yield (HY) municipals offer a tax-equivalent yield of 6.86%, significantly surpassing the 5.65% yield of U.S. high yield (HY) corporate bonds. This suggests a substantial after-tax benefit for investors in municipal bonds, especially for those in higher tax brackets. Similarly, investment-grade (IG) municipals present a tax-equivalent yield of 3.14%, compared to 2.85% for U.S. investment-grade credit. The data underscores the attractiveness of municipal bonds, particularly in a tax-sensitive investment strategy. The chart also emphasizes the size and activity of the U.S. municipal bond market, with $3.8 trillion in capital, 1 million outstanding securities, and $11.6 billion traded daily. This robust market activity, coupled with favorable yields, positions municipal bonds as a viable option for investors seeking tax-efficient income. The analysis reveals that HY municipals offer 121% of the yield of HY corporates, while IG municipals provide 110% of the yield of IG U.S. credit after tax, further reinforcing their potential as a strategic investment choice.
