Riskfree 3.00% Yield?!

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Topic Author
Zero85
Posts: 15
Joined: Tue Apr 02, 2019 6:27 pm

Riskfree 3.00% Yield?!

Post by Zero85 » Thu May 02, 2019 8:22 pm

Hi all,

I’m looking at the VYFXX, and the SEC yield has spiked recently. Did anyone else notice this?

I’m calculating close to 3.00% riskfree TEY yield as of now. Please check my math and let’s find out together. VYFXX is a Federal and NYS Tax exempt fund!

SEC Yield: 2.07%
My Fed Tax Rate: 22%
My NYS Tax Rate: 6.5%

TEY Yield: 2.07/(1-.285)=2.90%

Is this correct?

dash1s
Posts: 42
Joined: Thu Feb 08, 2018 8:42 pm

Re: Riskfree 3.00% Yield?!

Post by dash1s » Thu May 02, 2019 8:41 pm

Zero85 wrote:
Thu May 02, 2019 8:22 pm
Hi all,

I’m looking at the VYFXX, and the SEC yield has spiked recently. Did anyone else notice this?

I’m calculating close to 3.00% riskfree TEY yield as of now. Please check my math and let’s find out together. VYFXX is a Federal and NYS Tax exempt fund!

SEC Yield: 2.07%
My Fed Tax Rate: 22%
My NYS Tax Rate: 6.5%

TEY Yield: 2.07/(1-.285)=2.90%

Is this correct?
All New York MM tax-exempt yields have went vertical over the last 30 days. I haven't looked at VYFXX specifically, but the TEY yield you quote is in the ballpark of some similar NY MM's I am tracking. Trying to figure out the rationale as to the cause for such a spike. I don't want to sell individual bonds to chase yield that will only be gone tomorrow is my current dilemma.

MotoTrojan
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Joined: Wed Feb 01, 2017 8:39 pm

Re: Riskfree 3.00% Yield?!

Post by MotoTrojan » Thu May 02, 2019 9:45 pm

There was another post recently about some munis that spike. Sounds like a seasonal thing that occurs just after taxes are due, but does not persist.

Topic Author
Zero85
Posts: 15
Joined: Tue Apr 02, 2019 6:27 pm

Re: Riskfree 3.00% Yield?!

Post by Zero85 » Thu May 02, 2019 9:54 pm

dash1s wrote:
Thu May 02, 2019 8:41 pm
Zero85 wrote:
Thu May 02, 2019 8:22 pm
Hi all,

I’m looking at the VYFXX, and the SEC yield has spiked recently. Did anyone else notice this?

I’m calculating close to 3.00% riskfree TEY yield as of now. Please check my math and let’s find out together. VYFXX is a Federal and NYS Tax exempt fund!

SEC Yield: 2.07%
My Fed Tax Rate: 22%
My NYS Tax Rate: 6.5%

TEY Yield: 2.07/(1-.285)=2.90%

Is this correct?
All New York MM tax-exempt yields have went vertical over the last 30 days. I haven't looked at VYFXX specifically, but the TEY yield you quote is in the ballpark of some similar NY MM's I am tracking. Trying to figure out the rationale as to the cause for such a spike. I don't want to sell individual bonds to chase yield that will only be gone tomorrow is my current dilemma.

Thanks, I was very surprised too! Glad to hear it’s within reason. It’s nice seeing close to 3% annual riskfree investment.

dash1s
Posts: 42
Joined: Thu Feb 08, 2018 8:42 pm

Re: Riskfree 3.00% Yield?!

Post by dash1s » Thu May 02, 2019 10:21 pm

MotoTrojan wrote:
Thu May 02, 2019 9:45 pm
There was another post recently about some munis that spike. Sounds like a seasonal thing that occurs just after taxes are due, but does not persist.
I read that. But it hasn't really explained it for me. Just look at FSNXX end of month yields (and the below trend is more of the same for all the others). For those not familiar, this is the annualized daily accrual using the daily accrual for the last day of the month. I know treasuries have moved but that's a pretty violent move this past m/m.


1/31/15 0.01%
2/28/15 0.01%
3/31/15 0.01%
4/30/15 0.01%
5/31/15 0.01%
6/30/15 0.01%
7/31/15 0.01%
8/31/15 0.01%
9/30/15 0.01%
10/31/15 0.01%
11/30/15 0.01%
12/31/15 0.01%

1/31/16 0.01%
2/29/16 0.01%
3/31/16 0.04%
4/30/16 0.09%
5/31/16 0.14%
6/30/16 0.16%
7/31/16 0.19%
8/31/16 0.30%
9/30/16 0.49%
10/31/16 0.39%
11/30/16 0.31%
12/31/16 0.47%

1/31/17 0.43%
2/28/17 0.38%
3/31/17 0.57%
4/30/17 0.63%
5/31/17 0.53%
6/30/17 0.61%
7/31/17 0.57%
8/31/17 0.54%
9/30/17 0.63%
10/31/17 0.66%
11/30/17 0.69%
12/31/17 1.14%

1/31/18 0.85%
2/28/18 0.79%
3/31/18 1.09%
4/30/18 1.37%
5/31/18 0.94%
6/30/18 1.20%
7/31/18 0.73%
8/31/18 1.27%
9/30/18 1.24%
10/31/18 1.35%
11/30/18 1.43%
12/31/18 1.45%
1/31/19 1.15%
2/28/19 1.46%
3/31/19 1.26%
4/30/19 1.98%

^those are stated SEC Yields. One would have to adjust them for their own particular TEY.
Last edited by dash1s on Thu May 02, 2019 10:24 pm, edited 1 time in total.

Topic Author
Zero85
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Joined: Tue Apr 02, 2019 6:27 pm

Re: Riskfree 3.00% Yield?!

Post by Zero85 » Fri May 03, 2019 5:58 am

I feel if most people increased their financial literacy, they’ll be as amazed at I am right now.

I laugh when I see the millennials putting their money in the bank, CD’s, or even a taxable Vanguard money market.

People take 10 minutes to learn about TEY Yield and educate yourself?!

WS1
Posts: 91
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Re: Riskfree 3.00% Yield?!

Post by WS1 » Fri May 03, 2019 6:01 am

If you’re in NYC area Kearney Bank has a checking account paying 3.05%

grok87
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Re: Riskfree 3.00% Yield?!

Post by grok87 » Fri May 03, 2019 6:06 am

Munis are not risk free
RIP Mr. Bogle.

EdNorton
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Re: Riskfree 3.00% Yield?!

Post by EdNorton » Fri May 03, 2019 6:28 am

You are not getting a 3% yield, you are getting a 2.07% yield. in your tax situation, it is equivalent to a 3% pretax yield, but it is not yielding 3%. And it's not risk free, not a lot of risk, but not risk free.
Outside a dog, a book is man's best friend, inside a dog, it's too dark to read - Groucho

Topic Author
Zero85
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Joined: Tue Apr 02, 2019 6:27 pm

Re: Riskfree 3.00% Yield?!

Post by Zero85 » Fri May 03, 2019 6:35 am

EdNorton wrote:
Fri May 03, 2019 6:28 am
You are not getting a 3% yield, you are getting a 2.07% yield. in your tax situation, it is equivalent to a 3% pretax yield, but it is not yielding 3%. And it's not risk free, not a lot of risk, but not risk free.
Umm, you realize what TEY means right? There is no tax on this investment hence your mentioning of “pretax” is invalid.

EdNorton
Posts: 137
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Re: Riskfree 3.00% Yield?!

Post by EdNorton » Fri May 03, 2019 6:54 am

Zero85 wrote:
Fri May 03, 2019 6:35 am
EdNorton wrote:
Fri May 03, 2019 6:28 am
You are not getting a 3% yield, you are getting a 2.07% yield. in your tax situation, it is equivalent to a 3% pretax yield, but it is not yielding 3%. And it's not risk free, not a lot of risk, but not risk free.
Umm, you realize what TEY means right? There is no tax on this investment hence your mentioning of “pretax” is invalid.
Why is my mentioning pretax invalid but you compare it to pretax yield. My point is your yield is 2.07%, not 3%, almost 50% less.
Outside a dog, a book is man's best friend, inside a dog, it's too dark to read - Groucho

retiringwhen
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Location: New Jersey, USA

Re: Riskfree 3.00% Yield?!

Post by retiringwhen » Fri May 03, 2019 6:55 am

Read Kevin M.'s thread on Muni's viewtopic.php?t=246263&start=100

This spike is seasonal, happens every year around tax time (with another pretty common one around the end of the year too).

Unless you are looking to park money for 60 to 90 days, you really need to look at the 1 year returns for the Muni funds vs. other money market accounts to see if they are advantageous for you.

For those who are confused about TEY vs. TFY vs. SEC Yield, Kevin has another thread which is one of the great threads for education on the BH. viewtopic.php?t=248539

Being educated in the Muni market will help you make informed and profitable decisions. There are unique risks (hey, I live in NJ after all, the 2nd worst bond rating in the USA) and challenges to calculating individual returns due to local tax laws and your personal financial situation.

PSA complete.....

I have invested in creating my own spreadsheet for tracking the money funds I care about using the info from Kevin. It has improved my returns immensely (well as good as we can get in this secular low interest rate environment). I had money in the NJ Tax-Exempt Money Market for years when I would be (and am) much better served using a Treasury/US Gov't fund instead. I learned that from using his TEY threads calculations and analysis.

Bacchus01
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Re: Riskfree 3.00% Yield?!

Post by Bacchus01 » Fri May 03, 2019 6:58 am

EdNorton wrote:
Fri May 03, 2019 6:54 am
Zero85 wrote:
Fri May 03, 2019 6:35 am
EdNorton wrote:
Fri May 03, 2019 6:28 am
You are not getting a 3% yield, you are getting a 2.07% yield. in your tax situation, it is equivalent to a 3% pretax yield, but it is not yielding 3%. And it's not risk free, not a lot of risk, but not risk free.
Umm, you realize what TEY means right? There is no tax on this investment hence your mentioning of “pretax” is invalid.
Why is my mentioning pretax invalid but you compare it to pretax yield. My point is your yield is 2.07%, not 3%, almost 50% less.
I think you mean nearly 33% less.

Topic Author
Zero85
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Joined: Tue Apr 02, 2019 6:27 pm

Re: Riskfree 3.00% Yield?!

Post by Zero85 » Fri May 03, 2019 7:38 am

EdNorton wrote:
Fri May 03, 2019 6:54 am
Zero85 wrote:
Fri May 03, 2019 6:35 am
EdNorton wrote:
Fri May 03, 2019 6:28 am
You are not getting a 3% yield, you are getting a 2.07% yield. in your tax situation, it is equivalent to a 3% pretax yield, but it is not yielding 3%. And it's not risk free, not a lot of risk, but not risk free.
Umm, you realize what TEY means right? There is no tax on this investment hence your mentioning of “pretax” is invalid.
Why is my mentioning pretax invalid but you compare it to pretax yield. My point is your yield is 2.07%, not 3%, almost 50% less.
You’re invalid because you are wrong. See I think in terms of end results hence I state using TEY. You are citing the SEC yield. Do you not know about TEY calculation? [OT comment removed by moderator prudent]

In the tax exempt area, we don’t go by SEC yield.

NoVa Lurker
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Re: Riskfree 3.00% Yield?!

Post by NoVa Lurker » Fri May 03, 2019 7:47 am

Bacchus01 wrote:
Fri May 03, 2019 6:58 am
EdNorton wrote:
Fri May 03, 2019 6:54 am
Zero85 wrote:
Fri May 03, 2019 6:35 am
EdNorton wrote:
Fri May 03, 2019 6:28 am
You are not getting a 3% yield, you are getting a 2.07% yield. in your tax situation, it is equivalent to a 3% pretax yield, but it is not yielding 3%. And it's not risk free, not a lot of risk, but not risk free.
Umm, you realize what TEY means right? There is no tax on this investment hence your mentioning of “pretax” is invalid.
Why is my mentioning pretax invalid but you compare it to pretax yield. My point is your yield is 2.07%, not 3%, almost 50% less.
I think you mean nearly 33% less.
You are right, but this is a weird quibble when all of EdNorton's key points are right. The subject of this thread is "Riskfree 3.00% Yield," which got me to click on it. But these investments are not risk-free, and not even close to 3.00%.

There is nothing wrong with municipal money market funds, but I still don't see what is special about this one.

onourway
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Re: Riskfree 3.00% Yield?!

Post by onourway » Fri May 03, 2019 7:51 am

Zero85 wrote:
Fri May 03, 2019 7:38 am
EdNorton wrote:
Fri May 03, 2019 6:54 am
Zero85 wrote:
Fri May 03, 2019 6:35 am
EdNorton wrote:
Fri May 03, 2019 6:28 am
You are not getting a 3% yield, you are getting a 2.07% yield. in your tax situation, it is equivalent to a 3% pretax yield, but it is not yielding 3%. And it's not risk free, not a lot of risk, but not risk free.
Umm, you realize what TEY means right? There is no tax on this investment hence your mentioning of “pretax” is invalid.
Why is my mentioning pretax invalid but you compare it to pretax yield. My point is your yield is 2.07%, not 3%, almost 50% less.
You’re invalid because you are wrong. See I think in terms of end results hence I state using TEY. You are citing the SEC yield. Do you not know about TEY calculation? Hmm, that would explain your ignorance on this topic.

In the tax exempt area, we don’t go by SEC yield.
I suggest you consider altering the tone of your posts which may be appropriate for other corners of the Internet, but not around here.

This is a seasonal spike in muni yields that is well-known here. You need to compare numbers over 6 month and 1-year timeframes, not 7 days.

I also suggest that it is your understanding of the terminology here that is incorrect. Tax Equivalent Yield calculates the pre-tax yield one would need to receive on a normally taxed investment for its yield to be equal to that of a tax-free product. EdNorton's use of the word is correct.
Last edited by onourway on Fri May 03, 2019 7:56 am, edited 1 time in total.

Ybsybs
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Re: Riskfree 3.00% Yield?!

Post by Ybsybs » Fri May 03, 2019 7:52 am

Navy Federal Credit Union had a six month 3.00% APY certificate for a little while in Feb-Mar. It happened to line up well with the point when my house sold and the time before my rental lease is up, so I jumped on it. IMO, an FDIC-insured CD is a risk free 3.00% yield, but those are rare these days.

If you watch the boards, people do tend to post about these unusually high CD rates when one credit union or another runs a special.

renue74
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Re: Riskfree 3.00% Yield?!

Post by renue74 » Fri May 03, 2019 8:12 am

Ybsybs wrote:
Fri May 03, 2019 7:52 am
Navy Federal Credit Union had a six month 3.00% APY certificate for a little while in Feb-Mar. It happened to line up well with the point when my house sold and the time before my rental lease is up, so I jumped on it. IMO, an FDIC-insured CD is a risk free 3.00% yield, but those are rare these days.

If you watch the boards, people do tend to post about these unusually high CD rates when one credit union or another runs a special.
+1 There are plenty of 3% CD vehicles online, if you go over to NerdWallet and search. FDIC, pretty rock solid, but of course you tie up your $ for an extended period.

z3r0c00l
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Contact:

Re: Riskfree 3.00% Yield?!

Post by z3r0c00l » Fri May 03, 2019 8:36 am

Looks like a nice fund if your tax rate is on the higher side. My taxes are nice and low, so I'll be one of those millennials using bank accounts and CDs for short term.

Topic Author
Zero85
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Re: Riskfree 3.00% Yield?!

Post by Zero85 » Fri May 03, 2019 11:48 am

Maybe I’m the one who needs to learn from you all.
So let’s do a comparison for maximum money accumulation after tax.

Taxable Money Market Rate: 2.25 Yield
Tax exempt Muni Fund: SEC Yield 2.07%
However due to a Muni being tax exempt, the true yield would be 2.9%.

Guys, what am I missing here? Why is it better to own a taxable money market account which while on paper shows it a higher yield. I’m not understanding millennial logic so please educate.

retiringwhen
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Re: Riskfree 3.00% Yield?!

Post by retiringwhen » Fri May 03, 2019 12:10 pm

Zero85 wrote:
Fri May 03, 2019 11:48 am
Maybe I’m the one who needs to learn from you all.
So let’s do a comparison for maximum money accumulation after tax.

Taxable Money Market Rate: 2.25 Yield
Tax exempt Muni Fund: SEC Yield 2.07%
However due to a Muni being tax exempt, the true yield would be 2.9%.

Guys, what am I missing here? Why is it better to own a taxable money market account which while on paper shows it a higher yield. I’m not understanding millennial logic so please educate.
Yes the after tax return for the muni fund is better, no question based upon the data provided.

Three questions though, 1.) how long will that muni yield last? 2.) what additional risk are you taking by buying your state's muni fund vs. a more diversified taxable money market or national muni fund? 3.) have you done a similar comparison with Treasury-related funds such as VUSXX or VMFXX?

If you are satisfied with the answers to all three questions, you have a good clue that maybe you should invest in the muni fund.

BTW, the answer to #1 is almost assuredly about 30 days with a significant (40bp or more) drop in June. If the yield at 1.5% on the muni is still attractive, then maybe you have a good plan....

pward
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Re: Riskfree 3.00% Yield?!

Post by pward » Fri May 03, 2019 12:11 pm

A muni, especially one for New York which is having a lot of financial difficulties at the moment, is hardly risk free...

Uniballer
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Re: Riskfree 3.00% Yield?!

Post by Uniballer » Fri May 03, 2019 12:16 pm

Personally, I prefer to compare MMF interest rates using the after-tax yield. This is not hard for me because all of this interest is taxed as ordinary income. Using the compound yield is fine as long as you are consistent about it.

For Vanguard Prime Money Market (VMMXX) in the 22% bracket, and about 6.4% NY state tax, i get .0247x(1-.284) = ~1.77%.

Vanguard Treasury Money Market (VUSXX) (exempt from NY state tax) .0238x(1-.22) = ~1.86%.

Vanguard NY Municipal Money Market (VYFXX) (exempt from federal and NY state tax) .0206 = ~2.06%

The truth is that VYFXX yielded the equivalent of 1.68% for all of April 2019. Hard to say how long it will stay above 2%.
Last edited by Uniballer on Fri May 03, 2019 12:30 pm, edited 3 times in total.

onourway
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Re: Riskfree 3.00% Yield?!

Post by onourway » Fri May 03, 2019 12:19 pm

Zero85 wrote:
Fri May 03, 2019 11:48 am
Maybe I’m the one who needs to learn from you all.
So let’s do a comparison for maximum money accumulation after tax.

Taxable Money Market Rate: 2.25 Yield
Tax exempt Muni Fund: SEC Yield 2.07%
However due to a Muni being tax exempt, the true yield would be 2.9%.

Guys, what am I missing here? Why is it better to own a taxable money market account which while on paper shows it a higher yield. I’m not understanding millennial logic so please educate.
You are correct that if your tax bracket puts you in a situation where the tax equivalent yield is higher, you should consider that option. However, your understanding of how this applies appears a bit off. In your example, the true yield of the Muni fund is 2.07%. The 2.9% is the yield you would need to find from a taxable instrument in order to have parity with the Muni after paying taxes on the taxable fund.

Another way to look at this would be to compute the true yield of the Taxable fund after you pay taxes on it. That would be something less than 2.25%. If that number is lower than the 2.07% Muni, then you choose the Muni.

The two other points that are escaping you at the moment is that these rates do not persist in the Muni funds. They are cyclical. You need to compare yields over longer duration to get a real comparison. Second, as mentioned multiple times here, Muni funds are anything but risk free, and a fair bit more risky than say a Federal Money Market fund from Vanguard.

Admiral
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Re: Riskfree 3.00% Yield?!

Post by Admiral » Fri May 03, 2019 12:25 pm

There was a recent article in the NYTimes (https://www.nytimes.com/2019/04/12/busi ... Position=3) positing that the end of the SALT deduction in high taxes states like NY is causing muni yields to spike, as well-off investors look for tax-mitigation strategies in their investments. (And of course there was the warning that these bonds are not always "safe.")

I would assume this is a factor in the current muni market. It probably won't last.

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fizxman
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Re: Riskfree 3.00% Yield?!

Post by fizxman » Fri May 03, 2019 12:33 pm

onourway wrote:
Fri May 03, 2019 12:19 pm
Zero85 wrote:
Fri May 03, 2019 11:48 am
Maybe I’m the one who needs to learn from you all.
So let’s do a comparison for maximum money accumulation after tax.

Taxable Money Market Rate: 2.25 Yield
Tax exempt Muni Fund: SEC Yield 2.07%
However due to a Muni being tax exempt, the true yield would be 2.9%.

Guys, what am I missing here? Why is it better to own a taxable money market account which while on paper shows it a higher yield. I’m not understanding millennial logic so please educate.
You are correct that if your tax bracket puts you in a situation where the tax equivalent yield is higher, you should consider that option. However, your understanding of how this applies appears a bit off. In your example, the true yield of the Muni fund is 2.07%. The 2.9% is the yield you would need to find from a taxable instrument in order to have parity with the Muni after paying taxes on the taxable fund.

Another way to look at this would be to compute the true yield of the Taxable fund after you pay taxes on it. That would be something less than 2.25%. If that number is lower than the 2.07% Muni, then you choose the Muni.

The two other points that are escaping you at the moment is that these rates do not persist in the Muni funds. They are cyclical. You need to compare yields over longer duration to get a real comparison. Second, as mentioned multiple times here, Muni funds are anything but risk free, and a fair bit more risky than say a Federal Money Market fund from Vanguard.
Run an experiment. Put $1,000 in each and come back in a year and tell everyone how much you have, before and after taxes.

Topic Author
Zero85
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Re: Riskfree 3.00% Yield?!

Post by Zero85 » Fri May 03, 2019 8:37 pm

Vusxx seems to be my best option.

TropikThunder
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Re: Riskfree 3.00% Yield?!

Post by TropikThunder » Fri May 03, 2019 10:17 pm

Zero85 wrote:
Fri May 03, 2019 11:48 am
Maybe I’m the one who needs to learn from you all.
So let’s do a comparison for maximum money accumulation after tax.

Taxable Money Market Rate: 2.25 Yield
Tax exempt Muni Fund: SEC Yield 2.07%
However due to a Muni being tax exempt, the true yield would be 2.9%.

Guys, what am I missing here? Why is it better to own a taxable money market account which while on paper shows it a higher yield. I’m not understanding millennial logic so please educate.
You make it sound like you're actually getting paid 2.9%. Either your understanding is incorrect, or your description is. The better comparison is:
Taxable Money Market Rate: 2.25 Yield ----- After tax yield 1.61% given the 28.5% marginal tax you quoted
Tax exempt Muni Fund: SEC Yield 2.07% ----- After tax yield 2.07% since it's tax exempt.

So yes, the Muni fund taxable equivalent yield is (in your specific tax situation) a better selection. But, newsflash! Not everyone lives in NY, and not everyone is in the 24% tax bracket. I could make almost $125,000 as a single filer and still not be in the 24% bracket (afer maxing out 401k, IRA, HSA, and taking the standard deduction). Almost $250,000 as MFJ for the same. So for them, it's not a better choice.

You are not getting a 2.9% yield, that's not what TEY means. It's not millenial logic, it's simple math. [comment removed by moderator oldcomputerguy]

coachd50
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Re: Riskfree 3.00% Yield?!

Post by coachd50 » Fri May 03, 2019 11:10 pm

Zero85 wrote:
Fri May 03, 2019 11:48 am
Maybe I’m the one who needs to learn from you all.
So let’s do a comparison for maximum money accumulation after tax.

Taxable Money Market Rate: 2.25 Yield
Tax exempt Muni Fund: SEC Yield 2.07%
However due to a Muni being tax exempt, the true yield would be 2.9%.

Guys, what am I missing here? Why is it better to own a taxable money market account which while on paper shows it a higher yield. I’m not understanding millennial logic so please educate.
You are working the wrong way. The true yield is the 2.07% The Tax Equivalent Yield is simply a comparative figure to aid in decision making. It is not the amount by which your account will increase in value.

When talking about "true yield" it makes no sense to start at a tax exempt yield and add up, because there is nothing true or real about that. The correct procedure would be to look at a taxable yield, and subtract down.

retiringwhen
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Re: Riskfree 3.00% Yield?!

Post by retiringwhen » Sat May 04, 2019 5:55 am

coachd50 wrote:
Fri May 03, 2019 11:10 pm
When talking about "true yield" it makes no sense to start at a tax exempt yield and add up, because there is nothing true or real about that. The correct procedure would be to look at a taxable yield, and subtract down.
While I prefer to compare after-tax or Tax-Free Yields (TFY) like you, it is no more correct than calculating at Tax-Equivalent Yield (TEY). It has it's value as well, easier to look online and compare what other taxable funds may be paying for example without doing a lot of math, for example.

Both can be done mathematically correct and both are useful in their own way. The important thing is to be consistent within any comparison activity.

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gilgamesh
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Re: Riskfree 3.00% Yield?!

Post by gilgamesh » Sat May 04, 2019 7:11 am

Zero85 wrote:
Fri May 03, 2019 11:48 am
Maybe I’m the one who needs to learn from you all.
One never knows ... I’d say it’s possible.

The previous posts have already attempted to educate you, however, the important part of learning from it is entirely up to you.

coachd50
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Re: Riskfree 3.00% Yield?!

Post by coachd50 » Sat May 04, 2019 9:51 am

retiringwhen wrote:
Sat May 04, 2019 5:55 am
coachd50 wrote:
Fri May 03, 2019 11:10 pm
When talking about "true yield" it makes no sense to start at a tax exempt yield and add up, because there is nothing true or real about that. The correct procedure would be to look at a taxable yield, and subtract down.
While I prefer to compare after-tax or Tax-Free Yields (TFY) like you, it is no more correct than calculating at Tax-Equivalent Yield (TEY). It has it's value as well, easier to look online and compare what other taxable funds may be paying for example without doing a lot of math, for example.

Both can be done mathematically correct and both are useful in their own way. The important thing is to be consistent within any comparison activity.
As I said in the paragraph you didn't quote, those are equally useful methods for comparison. My point was that it makes no sense to then label the Tax Equivalent Yield a "true yield" as it does not represent the actual amount of value will gain.

NYCwriter
Posts: 267
Joined: Thu Sep 17, 2015 12:46 am

Re: Riskfree 3.00% Yield?!

Post by NYCwriter » Sat May 04, 2019 10:48 am

I found this calculator useful: https://funds.eatonvance.com/tax-equiva ... ulator.php
Are there others?

I hold a chunk of NY Muni in taxable. The NY is clearly attractive right now.

Risk is medium, so higher than aggregate bond, but out of the lower tax brackets it's advantageous.

Is there a way to assess state risk? I know NJ, Illinois are viewed as somewhat riskier.

retiringwhen
Posts: 1438
Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: Riskfree 3.00% Yield?!

Post by retiringwhen » Sat May 04, 2019 10:51 am

NYCwriter wrote:
Sat May 04, 2019 10:48 am
I found this calculator useful: https://funds.eatonvance.com/tax-equiva ... ulator.php
Are there others?

I hold a chunk of NY Muni in taxable. The NY is clearly attractive right now.

Risk is medium, so higher than aggregate bond, but out of the lower tax brackets it's advantageous.

Is there a way to assess state risk? I know NJ, Illinois are viewed as somewhat riskier.
Look at the spread of bond ratings in the funds, for example, much of NJ funds are just above junk... I haven't looked at NY, but I would assume they are actually much better. NY seldom shows up as a dangerous place for muni's. Of course even solid state's like PA have crises like the Harrisburg bankruptcy. Muni's are a world where research is required, no shortcuts.

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