In our case, since we are US-NRAs (US-non-resident aliens) who invest via the USA, we pay a 30% upfront tax on all interest and dividend income with the exception of FDIC-insured bank accounts and US Treasury instruments held directly. We pay 0% capital gains taxes.
In October, the net yield on our SCHZ was (70% of 1.41%) 0.99%. Net yield on SCHD was (70% of 4.2) 2.94%. A brokered 5yrCD had a net yield of 1.25%.
It really was a no-brainer swap for a total-return guy like me. The interest rate risk of SCHZ was is its 5 year duration. The purpose of our cash and bonds is portfolio ballast.
At time, the only thing with a better SEC yield (and a reasonable cost) would have been an offshore bond fund (PTTAX). I did not like the leverage or the options used in that fund so I eliminated it for consideration.
Since then, PTTAX has de-leveraged considerably.