A Finance Professor's blog.
I am a Professor of Finance in the Poole College of Management at NC State University.
My website: https://sites.google.com/ncsu.edu/warr
Opinions are my own.
Thursday, September 22, 2011
Markets are down and the 10 year bond rate is at 1.77%
Not good (unless you want to refinance your mortgage).
The yield on the Dow (ETF=DIA) is 2.7% and the yield is just taxed at 15%. If an investor is in the 28% tax bracket, the after-tax yield on the 10-year T-bond is just 1.1% while the DIA after-tax yield is 2.3% or more than twice the after-tax yield. And, while one could argue the DIA has risk of loss, I would argue the risk of loss on the 10-year treasury bond is also high over the next 5 years or so.
The yield on the Dow (ETF=DIA) is 2.7% and the yield is just taxed at 15%. If an investor is in the 28% tax bracket, the after-tax yield on the 10-year T-bond is just 1.1% while the DIA after-tax yield is 2.3% or more than twice the after-tax yield. And, while one could argue the DIA has risk of loss, I would argue the risk of loss on the 10-year treasury bond is also high over the next 5 years or so.
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