guys anyone know why taxable bonds have a flatter yield curve?
is it just because of the adjustment by a fixed percentage tax on yield would affect more the higher yielding maturities than the lower yielding
or is there more to it?
Tax-free yield curve:
- 1-year, 1.0%
- 10-year, 3.0%
- 30-year, 5.0%
Taxable (@ 30%) yield curve:
- 1-year, 0.7%
- 10-year, 2.1%
- 30-year, 3.5%
Which curve is flatter?
taxable!
Ta da!