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Ted · 01-06-2004, 06:11 PM

Cut-Throat,

Thanks for referring to me as a "financial whiz." That's about the next best thing as being recognized as one hellova fisherman. (I come pretty close to that but can't top your tarpon. Here in St. Louis, I fish the Mississippi after combined sewer overflows and sometimes hook a Tampon.)

Actually, what I recommended was Vanguard's Short Term Corporate (Bond) Fund. However, there is really very little difference in the probable performance of Vanguard's short term funds that hold corporate bonds, treasury bills, or an index that includes both.

I think that the main reason why Treasury securities (short term or longer term) yield a little less than high grade corporate securities of like maturity is simply that the interest on the Treasuries is exempt from state tax. This is an advantage for high income investors in states that tax interest income, and it causes those investors to bid the price of Treasuries up (and thus the yield down) relative to corporate bonds.

So, unless your income is subject to a fairly substantial state tax, you would probably net somewhat more return investing strictly in corporate debt, rather than Treasury debt or a mixture such as is contained in Vanguard's bond index funds.

01-06-2004, 06:11 PM	#7
Ted Recycles dryer sheets Join Date: Nov 2002 Posts: 398	Cut-Throat, Thanks for referring to me as a "financial whiz." That's about the next best thing as being recognized as one hellova fisherman. (I come pretty close to that but can't top your tarpon. Here in St. Louis, I fish the Mississippi after combined sewer overflows and sometimes hook a Tampon.) Actually, what I recommended was Vanguard's Short Term Corporate (Bond) Fund. However, there is really very little difference in the probable performance of Vanguard's short term funds that hold corporate bonds, treasury bills, or an index that includes both. I think that the main reason why Treasury securities (short term or longer term) yield a little less than high grade corporate securities of like maturity is simply that the interest on the Treasuries is exempt from state tax. This is an advantage for high income investors in states that tax interest income, and it causes those investors to bid the price of Treasuries up (and thus the yield down) relative to corporate bonds. So, unless your income is subject to a fairly substantial state tax, you would probably net somewhat more return investing strictly in corporate debt, rather than Treasury debt or a mixture such as is contained in Vanguard's bond index funds.