Buying bonds today...Help!

Rianne said:
What are agencies? I notice in the bond section of VG, that there are CDs, Treasuries, and Agencies in the bond section. It says they are government agencies. The interest is higher than anything else. Are they callable?
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They are bonds issued for government agencies, but are not backed by the government and yes, some are callable.
 
lawman said:
okay I just bought CUSIP # 080637JS1..The details page in my account shows a coupon rate of 2.25% but does not show a YTM..That is close to the YTM that was on the issue at the time I purchased. Is that the same?
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In your account, it will not show YTM. If you look on EMMA, it will show you your trade as well as yield to call - because it is currently continuously callable. They could come out right now and say they are calling 30 days from today. That's why on EMMA it shows your yield as 0.102%. Assuming it goes to maturity, your YTM is 2.084%.

Fidelity's price yield calculator is a good tool. Fill in the muni details and it will give you what you're looking for:
https://digital.fidelity.com/prgw/digital/priceyieldcalc/

https://emma.msrb.org/Security/Details/?id=080637JS1

If you click on the line for today, under the column for Calculation Date and Price, it shows 6/3/2022 - it's assuming it will be called as it would be advantageous for the issuer.
 
lawman said:
My cost was $10,019.23
Shouldn't my 2 page description that I printed show a YTM?

My confirmation shows a cost of $10,016.10
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Is the 2 page description a Trade Confirmation or some other document?
 
@lawman there is an old joke: "Life is like school, but first you get the test and then you get the lesson." From the basic level of your questions, my concern is that by buying bonds with real money, your lesson may turn out to be unnecessarily expensive. I am not enough of a bond guy to recommend reading, but I suggest that you ask here for some book and web site suggestions.

There is a sig line used here that I have always enjoyed:

"There are three kinds of men: The ones that learn by reading. The few who learn by observation. The rest of them have to pee on the electric fence and find out for themselves."

Good luck with your purchases.
 
To piggyback on OldShooter’s post, most big brokerages have bond desks. Give them a budget and a time frame and they’ll build you a ladder. Fidelity will, no additional charge.
 
I'm not really a reader and I'm not much of an observer..That only leaves one thing....

Not really interested in bond ladders right now..I want to be ready to back up the truck in a year or two if interest rates sky rocket from here..
 
lawman said:
I'm not really a reader and I'm not much of an observer..That only leaves one thing....

Not really interested in bond ladders right now..I want to be ready to back up the truck in a year or two if interest rates sky rocket from here..
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…and they could go the other way and you’ll be kicking yourself for not having some long positions.
 
lawman said:
What is obliger? Is CUSIP # 13033LYN1 insured?
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1. Obliger is the party responsible for the debt - who is ultimately paying the interest? In this case, it's Memorial Health Services.

Many times, municipal bonds can be issued by parties other than state and local government bodies. These are generally "Revenue Bonds". Many times corporations working with local governments will be allowed to issue municipal bonds and getting favorable terms. Hospitals fall into this category. Universities also get this ability. Many times when issuing municipal bonds in this way, the "obliger" will go through a trustee umbrella entity/authority that is set up. Payments on the bonds will flow from the obliger, through the financing entity/authority, and then to the bondholder. An "Educational Financing Authority" entity may be set up in a particular state which many universities will issue their municipal bonds through. The obliger is the university, though the Educational Financing Authority will be labeled as the issuer. In this case it's "California Health Facilities Financing Authority" where the obliger is Memorial Health Services, a group of hospitals set up as a corporation.

If you're going to be digging in to municipal bonds, you need to start skimming through the official statements - similar to stock offering prospectus. Going through the first couple will seem like a lot of work. However, you'll soon get to the point of being able to quickly jump right to the sections of importance. They are all laid out in a similar format. Here is the one for this bond:
https://emma.msrb.org/ER587641-ER456791-ER859522.pdf

See Appendix A regarding specifics of the obliger.

2. No, this issue is not insured. Generally, if you look at the listing on your brokers screen, if it is insured there will be a flag indicating that. With Fidelity, it will show an "I" attribute on the summary line and on the details screen it will name the insurer. I know Etrade works similarly and I would assume Schwab does as well. Additionally, insured issues will generally name the insurer on the cover page of the official statement and show their logo.

Look at this official statement and the middle of the cover page naming Assured Guaranty Municipal as the insurer:
https://emma.msrb.org/EA606276-EA474356-EA870889.pdf
 
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lawman said:
My cost was $10,019.23
Shouldn't my 2 page description that I printed show a YTM?

My confirmation shows a cost of $10,016.10
Click to expand...


With this smaller amount you could have bought an IBOND paying 9.62%.
I post this so other more experienced people can say why the IBOND is not a good idea as a replacement for a 1 year Bond.
i.e. what is the penalty for early withdrawal.
 
Time2 said:
With this smaller amount you could have bought an IBOND paying 9.62%.
I post this so other more experienced people can say why the IBOND is not a good idea as a replacement for a 1 year Bond.
i.e. what is the penalty for early withdrawal.
Click to expand...

Of course - at this time, I Bond is certainly choice #1. I think most folks make the assumption that everyone else has maxed out their annual I Bond purchases before delving in to other things.

The I Bond must be held for 1 year absolute minimum - there is no ability to get the money back sooner. Under 5 years, last 3 months interest is the penalty. For a 1 year hold, even accepting the penalty, it still beats out everything else, whether taxable or tax free.
 
njhowie said:
1. Obliger is the party responsible for the debt - who is ultimately paying the interest? In this case, it's Memorial Health Services.

Many times, municipal bonds can be issued by parties other than state and local government bodies. These are generally "Revenue Bonds". Many times corporations working with local governments will be allowed to issue municipal bonds and getting favorable terms. Hospitals fall into this category. Universities also get this ability. Many times when issuing municipal bonds in this way, the "obliger" will go through a trustee umbrella entity/authority that is set up. Payments on the bonds will flow from the obliger, through the financing entity/authority, and then to the bondholder. An "Educational Financing Authority" entity may be set up in a particular state which many universities will issue their municipal bonds through. The obliger is the university, though the Educational Financing Authority will be labeled as the issuer. In this case it's "California Health Facilities Financing Authority" where the obliger is Memorial Health Services, a group of hospitals set up as a corporation.

If you're going to be digging in to municipal bonds, you need to start skimming through the official statements - similar to stock offering prospectus. Going through the first couple will seem like a lot of work. However, you'll soon get to the point of being able to quickly jump right to the sections of importance. They are all laid out in a similar format. Here is the one for this bond:
https://emma.msrb.org/ER587641-ER456791-ER859522.pdf

See Appendix A regarding specifics of the obliger.

2. No, this issue is not insured. Generally, if you look at the listing on your brokers screen, if it is insured there will be a flag indicating that. With Fidelity, it will show an "I" attribute on the summary line and on the details screen it will name the insurer. I know Etrade works similarly and I would assume Schwab does as well. Additionally, insured issues will generally name the insurer on the cover page of the official statement and show their logo.

Look at this official statement and the middle of the cover page naming Assured Guaranty Municipal as the insurer:
https://emma.msrb.org/EA606276-EA474356-EA870889.pdf
Click to expand...

Wow! Lots to digest here..Thanks!
 
Time2 said:
With this smaller amount you could have bought an IBOND paying 9.62%.
I post this so other more experienced people can say why the IBOND is not a good idea as a replacement for a 1 year Bond.
i.e. what is the penalty for early withdrawal.
Click to expand...
I have Treasury Direct account and lots of I-bonds but I think I may just get another... Is the $10,000.00 limit each calendar year or 1 year from last purchase?
 
Be patient a crash is coming and bond fund liquidation will result in yields on individual bonds not seen since March 2020. The selling of bond funds is starting to accelerate. Consider a fund like BND that has an average maturity of 9 years and yet yields only about 2% versus risk free 10 year treasury notes at 3%. Why would any sane investor buy that fund versus treasuries?
 
Freedom56 said:
Be patient a crash is coming and bond fund liquidation will result in yields on individual bonds not seen since March 2020. The selling of bond funds is starting to accelerate. Consider a fund like BND that has an average maturity of 9 years and yet yields only about 2% versus risk free 10 year treasury notes at 3%. Why would any sane investor buy that fund versus treasuries?
Click to expand...

Exactly why I finally stopped the bleeding and sold bond mutual fund that I've had for 20 years..Served me well up until this year so overall I did okay..I'm using that money to buy tax free municipals that will mature in 12 - 15 months.. When those mature I will make a decision then about how to proceed..I feel pretty good with this plan.I am buying tax free because I'm trying to avoid higher tax rates and IRMAA..However I'm not sure I can exclude tax free interest form my modified adjusted gross income so it may not help me with IRMAA..Any idea?
 
Freedom56 said:
Be patient a crash is coming and bond fund liquidation will result in yields on individual bonds not seen since March 2020. The selling of bond funds is starting to accelerate. Consider a fund like BND that has an average maturity of 9 years and yet yields only about 2% versus risk free 10 year treasury notes at 3%. Why would any sane investor buy that fund versus treasuries?
Click to expand...



Vanguard Total Bond Index Fund is yielding 2.99%. I feel pretty sane holding it for life.
 
lawman said:
Exactly why I finally stopped the bleeding and sold bond mutual fund that I've had for 20 years..Served me well up until this year so overall I did okay..I'm using that money to buy tax free municipals that will mature in 12 - 15 months.. When those mature I will make a decision then about how to proceed..I feel pretty good with this plan.I am buying tax free because I'm trying to avoid higher tax rates and IRMAA..However I'm not sure I can exclude tax free interest form my modified adjusted gross income so it may not help me with IRMAA..Any idea?
Click to expand...

Here is something that might help you.

https://docs.google.com/spreadsheets/d/1M18jyMWV54AAcrks45VgISIgzbxu_7uy23gSJG1Ed80/edit#gid=0

Scroll down to: "Financial Pfds and ETDs"

When you see the yields on bank preferred stocks from banks such as JP Morgan, Bank of America, Capital One Financial, and Wells Fargo hit 8% or higher start backing up your truck. When yields start hitting 9% start loading up your truck. Then sit back and enjoy the nice juicy yield and watch your original capital almost double in short time as funds buy back the very same issues they sold.
 
Markola said:
Vanguard Total Bond Index Fund is yielding 2.99%. I feel pretty sane holding it for life.
Click to expand...

Nothing sane about owning BND. You need to look at your distributions over the past 12 months. It is not yielding 2.99% it's more like 2.3% and you have no protection of the principal invested that a CD or treasury provides when you buy them.

https://investor.vanguard.com/etf/profile/distributions/bnd

BND would have to yield over 4.5% to compensate for the market risk.
 
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