Definition of "Equivalent Taxable Yield"

The yield that must be offered on a taxable bond issue to provide the same after tax yield as that of a taxable investment.

Comparison between a corporate bond's taxable yield and a municipal bond's tax-free yield. Depending on the investor's tax bracket, the after-tax return may be greater with a municipal bond than with a corporate bond that has a higher interest rate. The equivalent taxable yield is equal to the municipal yield divided by 100% minus the tax bracket. For an investor who is in a 28% tax bracket, for example, a 9% municipal bond would have an equivalent taxable yield of 12.5% (9%/72%).