Freddie mac

[jrs]

I am new to this forum....and a recent retiree at 59.

One investment area I have not seen anything on are Freddie Mac & Fannie Mae bonds. A friend has mentioned these as good source of returns in the area of 5.5 to 6.5%. Shortfall seems to be that they can be called early on which would require reinvestment churn.

Any comments?

John

 

[Mr._johngalt]

Hello! Believe you are correct about Freddie Mac and
Frannie Mae being underdiscussed. I have no info re. these investments,
but I do know something about "callable"
investments. The investment "churn" can be a problem,
but that's why many bond investors (like me) try
to ladder maturities (or call dates). I have a bunch of stuff which is callable in 2004 and 2005. May be a problem, but in the meantime I am enjoying rates over
7% on everything and even if it all gets called, I will be
close to SS which will minimize the angst.

 

[jrs]

Thanks, John.

If you don't mind....what type of bonds are you acquiring at 7%....even if they may be called soon.

John

 

[Mr._johngalt]

These bonds were acquired years ago and are now
approaching their call dates. Only bonds or bond-like
investments I know of which pay rates like that today
would be rated as "junk". I am in a fund which is pretty
heavy in junk bonds also. Don't like the risk, but the
rates look good in today's environment. The last
investment grade bond I bought is paying 5.75%
with a 20 year maturity. Could do better now if I had
waited. Hindsight of course.