Hi yield Bills/Bonds at discount due to tax costs??

[coinstar]

With tax-exempt bonds, the interest rate is pushed down by the market because hi-net worth individuals are buying them, and those people are in the 39% tax bracket.

In other words, for someone in the 39% tax bracket, a 1% taxable dividend = about the same as a 0.61% tax-free dividend because the 1% taxable dividend incurs a 39 cent tax for these people.

Does the same home true to any extent for hi-yield bonds? For example, there's some 30 year bonds that were issued at 4% and some at 2%. All else equal, the ones issued at 4% will be much more expensive to buy because $100 at 4% = $200 at 2%. We all know this already and it's why interest rates move inverse to bond prices.

Given that I can buy secondary bonds for my long-term bond portion of the PP that are 20 to 30 years remaining on the bond, and given that the prices vary between about $150 and $106 (based on WSJ info), depending on the yield, shouldn't it be cheaper to buy a bond with a higher yield because the taxes of the higher yield make it less good than a bond with a lower yield?

If so, would holding a bond with an inflated face price and hi-yield, within an IRA, be considered an economic free lunch? Because the market should be willing to pay slightly less for it, due to tax costs, but you won't incur those tax costs in the IRA. And IRA space is limited and restricted so there's not an infinite amount to go around.

Further, if you were holding your bonds in a taxable account because you didn't have any more tax-sheltered space, would it make sense to preferentially buy bonds with lower yields?

I think if you buy a bond at a premium to face value, and you let it mature, you get to write off a loss for the difference, correct? But that must be taken against long-term capital gains earnings first, which makes this loss suboptimal because it's written off against income that's taxed at a rate lower than your marginal rate?

If you look at the bonds on the WSJ page that meet the 20 year + criteria for the PP, the interest rate varies between 5% and 2.75%.
http://wsj.com/mdc/public/page/2_3020-treasury.html

Surely, there must be SOME benefit of selecting a hi-rate versus another, depending on whether you're investing in an IRA or a taxable account? Given the market efficiency of tax-exempt bonds driving those prices down, I would imagine something similar exists in Tbonds. Unless, perhaps TBond holders don't care about taxes. For example, most of the investors are pension funds or international countries. Whereas with tax exempt bonds, the interest rate is so low that a sovereign foreign country wouldn't touch the stuff because they derive no tax benefit. And as such, if the market price of a secondary TBond was pushed down inefficiently relative to a lower-interest rate bond (due to tax reasons), an international arbitrageur not part of US Tax rates, would buy it up and ensure it's all efficient.