Taxable Yield

4. corporation bonds. These bonds are subject to both Federal and state tax. In early 1972 those of highest quality yielded 7.19% for a 25 year maturity, as reflected in the published yield of Moody’s Aaa corporate bond index. The so called lower mediumgrade issues-rated Baa-returned 8.23% for long maturities. In each class shorter term issues would yield somewhat less than longer term obligations.

Comment. The above summaries indicate that the average investor has several choices among high grade bonds. Those in high income tax brackets can undoubtedly obtain a better net yield from good tax free issues than from taxable ones. For others the early 1972 range of taxable yield would seem to be from 5.00% on U.S. savings bonds, with their special options, to about ?2% on high grade corporate issues.

General Portfolio Policy 95Higher Yielding Bond Investments By sacrificing quality an investor can obtain a higher income return from his bonds. Long experience has demonstrated that the ordinary investor is wiser to keep away from such high yield bonds. While, taken as a whole, they may work out somewhat better in terms of overall return than the first quality issues, they expose the owner to too many individual risks of untoward developments, ranging from disquieting price declines to actual default.