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Old 11-11-2011, 02:54 PM   #441
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Not to worry - we're collecting a 5 basis point higher interest payment while we wait.
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Old 11-12-2011, 10:35 AM   #442
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DAMN you, efficient markets. I want to go back to OSM, from my recent cash-generating move to ISM. But the price of OSM faithfully stays 60 cents or more higher. Oh well, I know they'll get very close at some point soon.
Not to fear ...
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Old 01-27-2012, 10:59 AM   #443
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The January ISM interest payment (on par) was the highest in three years at 5.92%.

Due to lower year-over-year inflation, for the next three months, the interest payments will be:

Feb 5.58%
Mar 5.44%
Apr 5.01%

January's CPI data will be released on Feb 17.
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Old 01-27-2012, 02:42 PM   #444
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Originally Posted by FIRE'd@51 View Post
The January ISM interest payment (on par) was the highest in three years at 5.92%.

Due to lower year-over-year inflation, for the next three months, the interest payments will be:

Feb 5.58%
Mar 5.44%
Apr 5.01%

January's CPI data will be released on Feb 17.
Thanks for the update.

Now that my even my highest priced ISM shares (21.37 bought back in 03/01/07) are in the green, and Sallie Mae doesn't appear to be in immediate danger of collapse, I have to thank Brewer for the tip on these bonds. I mostly sold ten year TIPs that would have matured in 2010/2011, to purchase these things and for the longest time it looked like a very poor trade. But with these bonds consistently paying out 6-7% current yield and providing some nice protection if inflation accelerates, I glad I didn't wait for the TIPs to mature before buying ISM/OSM.
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Old 02-16-2012, 12:28 PM   #445
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Wow, serious arbitrage (ISM/OSM) opportunities now, OSM is like a buck-and-a-half higher (it's worth more, but not THAT much more).
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Old 02-27-2012, 11:38 AM   #446
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Wow, serious arbitrage (ISM/OSM) opportunities now, OSM is like a buck-and-a-half higher (it's worth more, but not THAT much more).
Seriously though, OSM is almost $1.50 higher than ISM right now. Is there some new news that favors the risk-profile of OSM vs ISM (other than the fact OSM matures almost a year sooner) ? I realize as 2017/2018 approach, that year has more impact on the price ...
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Old 02-27-2012, 11:53 AM   #447
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Seriously though, OSM is almost $1.50 higher than ISM right now. Is there some new news that favors the risk-profile of OSM vs ISM (other than the fact OSM matures almost a year sooner) ? I realize as 2017/2018 approach, that year has more impact on the price ...
You can't just look at the last trades. To do the "arb" you must sell OSM at the bid and buy ISM at the ask. Currently, this spread is about 0.85 (still good), but only 100 shares on each side.
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Old 04-05-2012, 12:34 PM   #448
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I noticed that this Forbes article, which gives one person's opinion regarding possible future inflation, mentions OSM (interestingly not ISM) as a possible inflation defense.

Ben Bernanke's Secret Inflation Plan - Forbes

Quote:
On the buy side, one adjustable-rate preferred whose payout is tied to the Consumer Price Index is SLM Corp. adjustable preferred maturing on Mar. 15, 2017 (OSM, 23). It is rated Ba1/BBB– and currently pays a 4.96% dividend yield based on monthly year-over-year CPI plus 200 basis points. SLM is the ­student-loan ­organization, Sallie Mae.
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Old 09-17-2013, 10:03 AM   #449
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It's been 18 months (how time flies ) since I last updated this.

The year-over-year change in CPI-U for August (released today) was 1.52%. The current yields (on par) for ISM for the next three months are:

Oct 3.80%
Nov 4.01%
Dec 3.57%
=========
Ave 3.79%

The average current yield over the next three months at the current offer price (22.65) is (25/22.65) = 4.18% and, assuming 1.5% inflation for the next 4.25 years, a nominal YTM of about 6%.

I feel a lot more comfortable continuing to hold these with SLM trading at 25 and paying a 0.15 quarterly dividend.
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Old 10-05-2015, 07:22 PM   #450
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Not much talk about ISM/OSM lately (like, in years). Seemed like they were on glide-path to maturity in a couple years. But I just noticed that prices have been falling over the last few months, and especially the last few days. Any ideas what's up ?
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Old 10-05-2015, 08:07 PM   #451
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Not much talk about ISM/OSM lately (like, in years). Seemed like they were on glide-path to maturity in a couple years. But I just noticed that prices have been falling over the last few months, and especially the last few days. Any ideas what's up ?
Likely a combination of significant widening in high yield spreads, low CPI (reducing cash yield), and the revelation that NAVI (the issuer of these bonds) is potentially in the sights of the CFPB over student loan servicing. I would guess that they are too short at this point to really be at risk of default, but stranger things have happened.
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Old 10-07-2015, 09:45 AM   #452
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Good to see the discussion here. I almost pulled the trigger on some more ISM at $21.30 ish (still holding 600 shares from back in the day). Then saw the nonsense about NAVI and the uncertainty with them.

The yield to maturity was over 10% for ISM and OSM in the last week. Pretty crazy yields for something that matures in the next couple years unless it's jam packed with risk.

I didn't bite but it sure was tempting. I also found out you can't buy these securities online at Fidelity. I called customer service and they said you have to call in to buy because people were mistaking ISM/OSM for ETFs. WTF.
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Old 10-07-2015, 02:23 PM   #453
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Yeah, I was tempted too.

Pretty crazy resurrecting a thread that's been inactive for over 2 years !
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Old 10-07-2015, 02:38 PM   #454
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The yield to maturity was over 10% for ISM and OSM in the last week. .
That sounds high. How did you come up with that?

Ref the risk...... When most of the earlier discussions were taking place on ISM/OSM, they were issued by SLM and the rating was BBB+. Now they're issued by NAVI and the rating is BB. Still, it does seem like the time to maturity is short enough that the default risk is low as brewer mentioned.

I still own a bit of both. Avg cost is in the low teens and I haven't wanted to take the cap gain. It was tempting to sell when they both went almost to PAR a while back though....... At this stage, I'll most likely wait for maturity and collect the $25.
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Old 10-07-2015, 03:27 PM   #455
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I still own some of these also. Actually had a GTC sell order in for 24.90 for some time but it never was executed (but so close). They are in an IRA.
I've been tempted recently but haven't pulled the trigger.
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Old 10-07-2015, 03:51 PM   #456
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That sounds high. How did you come up with that?
Dunno. Some online calculator. ISM was trading at 21.30 or so which would give you a 17% return at maturity. Add in the 3% or so coupon (2.05% real plus CPI of about 1%). Must be close to 10% YTM, can't recall the exact %.

OSM was an even better deal in terms of YTM because the maturity date is only about 18 months away. I was looking at OSM when it was trading under 22 for a brief moment. So tempted to bite at that level.
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Old 10-07-2015, 06:29 PM   #457
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Still, it does seem like the time to maturity is short enough that the default risk is low as brewer mentioned.
ISM owners could chop a year off the time to maturity by exchanging to OSM, at a cost of about $1/share.
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Old 05-24-2016, 12:40 PM   #458
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What do people think about the ownership of ISM by Navient ? I didn't realize this had happened until I clicked on ISM in my yahoo portfolio. Oddly, OSM still shows as SLM Corp.
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Old 05-24-2016, 01:18 PM   #459
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What do people think about the ownership of ISM by Navient ? I didn't realize this had happened until I clicked on ISM in my yahoo portfolio. Oddly, OSM still shows as SLM Corp.
Not a huge deal. In less than 2 years we'll have our money back, right? I almost bought some more in the past 6 months when it dipped to $21.xx. ISM and OSM are both trading close to par so it doesn't seem like a lot of credit risk is priced in right now.
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Old 05-24-2016, 03:24 PM   #460
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ISM seems consistently about 50c lower these days. Yet it gives you this great 2% real return for a year longer (IOW, about twice as long, starting now). Seems like that's a good bit of risk priced in: double the remaining time for maturity, for something bad to happen.

It's pretty interesting to do a comparison plot of ISM and OSM. Here's the last year (OSM is red, ISM is black). ISM is a lot more volatile. SORRY: can't seem to upload image of comparison plot.
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