Fixed Income Investing II

[COcheesehead]

I only sell if I have an opportunity to make reasonably substantial money AND I have a better alternative.
From there I hit sell on the bond and see if there is a bid. I then hit preview and Fidelity will tell me the exact total I will receive including any interest earned up to that point and what the selling yield is.
If there is no bid, I request Fidelity seek bids and the process starts over. I make my final decision always at the sell preview stage because I know what yield I am giving up and what exact amount of cash I will get back.
I pull the trigger on about 75% of the bonds I seek bids on, but sometimes they are low ball and I hold the bond.

 

[Fotodog]

Thanks, that’s very helpful!

 

[Texas Proud]

You live on the edge. I would never have bought that low. The rating is low, the sector is sketch. Now a downgrade. I would be looking for a bid soon.

It is a risk... I am about half 'good' junk (mostly one level down) and half IG... this one went down quickly... I need to see if there were any notices it had a possible downgrade... I think it was because the REIT had a bigger than anticipated loss... but it is supposed to be high grade buildings..


BTW, one of my friends parents called me to complain about GM back when it went into BK... could not believe her bonds were worthless so quickly as they were (IIRC) high IG.. like any investment you never know...

 

[COcheesehead]

It is a risk... I am about half 'good' junk (mostly one level down) and half IG... this one went down quickly... I need to see if there were any notices it had a possible downgrade... I think it was because the REIT had a bigger than anticipated loss... but it is supposed to be high grade buildings..


BTW, one of my friends parents called me to complain about GM back when it went into BK... could not believe her bonds were worthless so quickly as they were (IIRC) high IG.. like any investment you never know...

True, there is risk in everything.

 

[gayl]

Just reading a few other forums I post on. The panic is palpable. People asking how to lock in 5% CDs for 10 years. Ouch.
I fear too many have been caught short term.

I took off for a month and unplugged. Do not like logging on in many places overseas.. Ouch. Have 25% of my CDs maturing end of year and wanted to buy some 5 yrs out. Now stumped. Do I go out 5 or 10 yrs?

 

[erkevin]

I took off for a month and unplugged. Do not like logging on in many places overseas.. Ouch. Have 25% of my CDs maturing end of year and wanted to buy some 5 yrs out. Now stumped. Do I go out 5 or 10 yrs?

Anything out past 5 years is 99% most-assuredly callable.

 

[Chuckanut]

I just watched the bond market. Big coupons and longer durations were getting harder to buy already in late October, early November. I figured if I was 75% right on the timing, I would be fine. Little did I know that right around the corner the music would stop, but I already had a good sturdy chair to sit on.

+1

I see the 10 year treasury has now dropped to 3.91%. I checked earlier and about a week ago, IIRC, it was 4.2%.

TIPS real yields have dropped also.

Scroll down https://tipswatch.com/ dated 12/14 to see how quickly the real return on TIPS has dropped. On 12/12 all the TIPS were still over 2% real. Today, they are all below 2%.

I created this chart at about 9:10 am ET and 15 minutes later the 5-year real yield had fallen to 1.74% and the 10-year to 1.72%. There’s no way to say exactly how far this could go. But it is significant because the Treasury will be auctioning a reopened 5-year TIPS on Dec. 21 and then a new 10-year TIPS on Jan. 18, 2024. Both of those auctions could result in much lower real yields than we have seen in recent months.

 

[COcheesehead]

They received advance notice, here at least. But perhaps not enough to counter the now distant predictions of "higher and higher" and "higher for longer" (remember that??).

I remember reading posts maybe on here or elsewhere when questioned about what sign folks were waiting for to go longer and the response was “I’ll know it when I see it”. I think they just saw it.

 

[GravitySucks]

Had a bond mature and one called while out of town last week. Still plan on rolling those to the 5 year TIPS reopening now. Have more coming due soon that was going to be rolled to that Jan 10 yr TIPs but I’m going to re-think about going that long now.

Ah well, was able to rebuilt my ladder and picked up what’s looking like some good 5 and 10 years over the last year.

 

[COcheesehead]

I wonder in another 6-12 months if this thread slowly fades away. It was an interesting time to be in fixed income.

 

[aja8888]

I wonder in another 6-12 months if this thread slowly fades away. It was an interesting time to be in fixed income.

I was thinking the same and may start moving and funds coming available into SPY or other etf and getting back to a moderate amount of equity in my AA.

 

[pb4uski]

I was thinking the same and may start moving and funds coming available into SPY or other etf and getting back to a moderate amount of equity in my AA.

I've been thinking similarly, but the reason that I went into capital preservation mode and sold my equities was because I thought equities were overvalued and the uncertainties of covid. While I know there are various measures of valuation, P/E ratios today are not very different from back then and are still higher than historical averages (even just recent historical averages for last 10 or 20 years).

I'm just thinking it might be a little too early.

 

[jazz4cash]

Anything out past 5 years is 99% most-assuredly callable.

That might be true for brokered CDs but I believe most bank CDs are not callable and pay 4-4.5 for 5 yrs. I never see any reference to Bank CDs being callable so I assumed they are not. Does anyone know otherwise?

 

[MichaelB]

I remember reading posts maybe on here or elsewhere when questioned about what sign folks were waiting for to go longer and the response was “I’ll know it when I see it”. I think they just saw it.

They saw it, and hopefully they didn’t get too greedy waiting for even more and were able to take advantage of the yield highs 2 months ago.

 

[aja8888]

I've been thinking similarly, but the reason that I went into capital preservation mode and sold my equities was because I thought equities were overvalued and the uncertainties of covid. While I know there are various measures of valuation, P/E ratios today are not very different from back then and are still higher than historical averages (even just recent historical averages for last 10 or 20 years).

I'm just thinking it might be a little too early.

It might be early. I do have a good amount of treasuries maturing between january and April so maybe I'll just DCA into ETF's. Or if rates stay fairly high, maybe I'll build another ladder out three more years. But I will have to do something with the maturing treasuries,

 

[COcheesehead]

Over the last few weeks I pulled any bond maturing within the next two years in and sold them. I also took any bids that existed for Agency bonds that were highly likely to be called and bought longer duration non callable bonds in the 6%++ yield range with maturities in the 8-10+ year range. I also stuck more into high yielding CEFs.
The end result is I will have very little maturing in the next couple of years, I increased my reliable yearly cash flow and I somehow ended up with more cash because the CEFs give you more bang for the buck.
I will slowly start adding into existing equity positions, but not likely anything new. My equity assets have been rather pleasing.

 

[Chuckanut]

I wonder in another 6-12 months if this thread slowly fades away. It was an interesting time to be in fixed income.

In regards to bond funds all I can say is Once Bitten, Twice Shy. Equities are still equities so there are no surprises there. Our return to more normal rates is reassuring. Years ago I can remember the fuss over those Penfed 5 year 3% CDs. Something else like that will appear from time to time. So , I think this thread will be around in some way, shape or form.

 

[Montecfo]

I remember reading posts maybe on here or elsewhere when questioned about what sign folks were waiting for to go longer and the response was “I’ll know it when I see it”. I think they just saw it.

I remember someone saying they were going to wait till the Fed said it was done hiking. I said well, the yields will turn sharply when the market begins to perceive an end to Fed hikes. The great long yields will be gone.

Painful lessons that need not be learned more than once.

 

[Montecfo]

I've been thinking similarly, but the reason that I went into capital preservation mode and sold my equities was because I thought equities were overvalued and the uncertainties of covid. While I know there are various measures of valuation, P/E ratios today are not very different from back then and are still higher than historical averages (even just recent historical averages for last 10 or 20 years).

I'm just thinking it might be a little too early.

This is the challenge for sure. When bonds become less attractive, equities have rallied and no longer seem a great buy.

But there are sectors.

I have maintained my allocation primarily to equities. But my fixed income holdings have certainly changed dramatically since end of 2020.

 

[rkser]

I know mostly individual Bonds are being discussed here, but for the uninitiated -

We have mostly CDS & money markets in our IRAs because that is all we find easy to understand in the fixed income,

As the Fed rate seems to stabilize from the recent meeting, what do you think of investing in BND, TO KEEP THINGS SIMPLE on lines with the 3 FUND Portfolio.

As we all know, it has had a recent devastating performance due to rapid rate increase your thoughts

Solicit your thoughts .....

 

[pb4uski]

I remember reading posts maybe on here or elsewhere when questioned about what sign folks were waiting for to go longer and the response was “I’ll know it when I see it”. I think they just saw it.

Just pure luck but I extended maturities a short while ago... currently weighted as average maturity is about 3-1/2 years.

 

[Texas Proud]

So, talking about holding till maturity...


I have some US savings bonds that are reaching their 30 year life starting in January... I was buying them for about 2 years way back when so a good number of them coming due..


Not a lot of money but will have to get a schedule together on when I can cash them in for maximum interest..

 

[Martlet]

I wonder in another 6-12 months if this thread slowly fades away. It was an interesting time to be in fixed income.

I expect there will be enough twists and turns to keep fixed income investment fairly interesting -- though likely not as interesting as the past two years. I hope that this thread continues to be active.

I've certainly made mistakes in fixed income in this period but I went back and looked and see that I got some big things right. The main one was selling my long term bond funds in November 2021. That avoided big losses and was around the time that Warren Buffet said something to the effect that long bonds amounted to return-free risk at that moment. I got lots of things wrong since then but mostly count those costs as the price of experiential learning. I have not followed your frequent and timely calls to move out in duration to the extent I should have. The longer bonds and in particular the preferred stock (COF/PR/L) I bought have been winners but I should have bought more of those. I guess I've been surprised how brief the time windows have been to jump in and grab well-rated, long duration, non-callable or late call date bonds.

Now that it seems that interest rates have peaked, we have a reasonable relationship between risk and reward for longer duration bonds. Thank goodness for that!
*

 

[COcheesehead]

I am leaving the forum. So long, farewell.
[mod edit]

 

[imbatman]

.....what do you think of investing in BND, TO KEEP THINGS SIMPLE on lines with the 3 FUND Portfolio.

As we all know, it has had a recent devastating performance due to rapid rate increase your thoughts

Solicit your thoughts .....

BND is a Morningstar GOLD (top) rated ETF that is basically free of expense (0.03%), yields about 4-5% today and is 70% AAA and 50% government. 6yr/8yr duration/ maturity respectively so definitely in the intermediate category (I tend to like long term at this point in time but I fiddle with stuff more frequently than you may). Yeah the 2022 bonds massacre dropped its 10-year average annual return to 1.7% but unlikely to repeat in the immediate future. I mean if you are looking for a simple, safe holding to generate some taxable income and don't want to think about it further, seems pretty ideal IMO. Good luck!