Fully Taxable Equivalent Yield

You pay 40% marginal tax. You have a corporate bond that pays 8% a year to you, pretax. You are then fully taxed on the "throw" from that bond as ordinary income. So you keep 60% of its throw after tax. On 8%, after tax, that yield would then be .6 times 8%, or 4.8%. That 4.8% is the fully taxable equivalent yield, and it matters because investors, for likely the same or less risk, could have put their dough into a muni bond, which carries no taxes..in this case, the over-under spread being that 4.8% rate for muni bonds.

That is, if a muni bond was offering 4.9%, you'd opt for the muni, all else being equal, because it has an after tax equivalent yield that's better than the corporate bond.