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This article sheds some new light on the behavior of private placement yields, with the advantage of previously unpublished data collected for many years by the Prudential Insurance Company of America. Our analysis of these data suggests that: • Yields on privately placed debt do not closely follow comparable-quality public debt issues. For high-quality issues, A-rated, there is more similarity in fluctuations, while for below-investment-grade issues, Ba-quality; there is little common movement. • Economic activity, and its direction of change, affects yields on private placements. High and/or expanding levels of economic activity generally reduce spreads, while low and/or contracting levels of economic activity tend to increase private placement yields relative to Treasury yields. • In late 1989 and the early 1990s, investment-grade private placement yields were about 30 bp-40 bp lower than would be expected, and below-investment-grade private placement yields were about 40 bp higher than expected, given the state of the economy. That is, our data support the view that there was an important credit crunch for below-investment-grade borrowers in the private placement market, as life insurance companies preferences shifted toward investment-grade paper. [ABSTRACT FROM AUTHOR]

The article determines whether zero coupon bonds and other original issue discount bonds (OIDB) issued before July 1, 1982 may provide potential profit opportunities to investors. Non-taxable holders of such bonds may be able to sell them before maturity date at attractive prices, producing a much higher-than-expected rate of return over their holding period while taxable investors may be able to buy these bonds at prices that produce attractive after-tax returns. There is a difference between the linear accretion schedule used by the U.S. Internal Revenue Service (IRS) and the market accrual schedule and this difference can become profit opportunities. As an OIDB becomes seasoned, the discrepancy between the IRS benchmark price and the price to yield widens, which increases the potential capital gain of the second buyer. Since capital gains are valuable to taxable investors, taxable buyers who avoided the new OIDB will become interested in OIDB in the secondary market.

Investigates the price behavior in the United States Treasury bond futures market. Effects of proximity to a price limit on the price behavior; Tendency of the price to reverse direction after the morning open; Examination of an alternative hypothesis on price behavior; Indications of price reversals.

This paper presents some estimates of how this inflation tax falls upon individuals and families with different incomes and filing statuses.
In summary, these estimates of the percentage loss in real after-tax income accompanying a 1 percent price level rise indicate that the impact of inflation varies considerably from one income level to another with taxpayers in the $9000-$200000 income range substantially better able to maintain their purchasing power than taxpayers with lower incomes or moderately higher incomes. For low income persons, the fact that the personal exemption and maximum standard deduction are fixed in dollar terms is largely responsible for the 'inflation tax'. In contrast, for higher income persons, it is largely the progressivity of the tax schedule that causes an inflation tax to exist. Singles are better insulated at the low end of the income range but at higher incomes tend to experience larger losses from inflation than do families filing joint returns. [ABSTRACT FROM AUTHOR]