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Another Bond Called
Old 06-18-2020, 09:02 AM   #1
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Another Bond Called

Since April I've now had three bonds called, the first two were Agency bonds, this one was a Goldman Sachs issued. I bought them as they paid best for their rating, even at Yield to Worst, but what I didn't consider was there isn't anywhere safe to put the money to work at a decent rate.
I always thought the Fixed Income side would be the easy part. Another humbling revelation! How I'm not living in a cardboard box under a bridge is a miracle.
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Old 06-18-2020, 09:15 AM   #2
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My (snake-bit) friend has had the same problems in the last few years. Part of his large inheritance back in late 2012 included several bonds in both a brokerage account and an inherited IRA. While many of those bonds had maturity dates within a few years of getting the inheritance, some of the others had much longer dates, well into the 2020s. In the inherited IRA, those bonds were spinning off enough cash throughout the year to pay his RMDs. But after the last ones got called early, I had to restructure his IRA a little bit so its vastly reduced income could still cover his RMD.
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Old 06-18-2020, 09:57 AM   #3
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For my IRA:

I switched to a Separately Managed Account (SMA) core fixed income at Fidelity. The fee is 0.40% (1,400 per year) with a minimum investment of 350,000. They pick bonds across different industries. It's only been a little over a week and they have not yet invested the entire 350K. If you stop the service you still own the individual bonds.

I also called the bond desk and had them propose several bonds. There is no cost for the advice but each bond cost $1 per $1,000 purchase. I hold the bonds to maturity is my plan.

I also own BND Vanguard Bond Index as well as VWINX Vanguard Wellsley which is 60% bond, 40% stock.

So we shall see which works and which does not....
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Old 06-18-2020, 10:11 AM   #4
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I am in the same boat with CD's maturing next month.


What about those I-shares that invest in bonds with fixed maturity date??


If you own any of these securities can you let us know how is working out for you


BSQJ is a symbol for what I am proposing..
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Old 06-18-2020, 02:50 PM   #5
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I got into the Separately Managed Account (SMA) with Fidelity for municipal bonds almost two yeas ago. Fee is 0.40%. Minimum investment $500,000. It bought about 50 bonds through November 2018 and the rest (about 10) in 2019. I have had only one called which was June 1, 2020. Have two more with call dates coming up in August. I am expecting them to be called.
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Old 06-18-2020, 03:22 PM   #6
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So we shall see which works and which does not....
Thanks. It will be very interesting to hear about your results over time.
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Old 06-18-2020, 03:24 PM   #7
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How I'm not living in a cardboard box under a bridge is a miracle.
Oh, come on! It's not that bad.
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Old 06-18-2020, 06:37 PM   #8
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I am in the same boat with CD's maturing next month.


What about those I-shares that invest in bonds with fixed maturity date??


If you own any of these securities can you let us know how is working out for you


BSQJ is a symbol for what I am proposing..
Do you mean BSCQ? Or BSCJ? I've owned these Bulletshares a few years ago as a CD substitute. IMO they're ok... but I prefer CDs.

For example... BSCQ is mostly A and BBB corporate bonds. YTM is 1.73% and YTW is 1.69%... so after 10 bps of expenses you can reasonably expect to yield 1.6% or so.

Meanwhile, brokered CDs are about 0.95% but Navy Federal 5 year CDs are 1.3% and PenFed is 1.1% and online savings accounts are 1.15%.

I just don't see the 0.5% or less of a premium over FDIC insured sufficient for the credit risk of corporate bonds vs no credit risk with FDIC insured deposits... especially with the potential impact of the recession on corporate balance sheets.

I'd shop around for a credit union 5-year CD special.
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Old 06-18-2020, 07:33 PM   #9
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Thanks. It will be very interesting to hear about your results over time.
I just put all the non-equity $ into BND and forget about it. It seems like too much hassle to endlessly tinker with it.
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Old 06-19-2020, 11:12 AM   #10
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Live and learn.
Never considered the fact there would be no yield to be found if rates dropped so much the call was activated.
Now I know.

Gets me wondering how much of this is going on inside my bond funds.
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Old 07-06-2020, 09:03 AM   #11
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And another one called. Kind of glad though.
This was my last stand alone corporate bond (the rest are in mutual funds. ) and was issued by Marriott. It was down graded 3 times this year and I was slightly worried it could default.
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Old 07-06-2020, 10:36 PM   #12
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It was down graded 3 times this year

did they pay you market value?
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Old 07-07-2020, 04:39 AM   #13
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I had a bond called this month too. It paid 3% and was at 104 (make whole). I am not sure I see the logic in the call.
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Old 07-07-2020, 07:20 AM   #14
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And another one called. Kind of glad though.
This was my last stand alone corporate bond (the rest are in mutual funds. ) and was issued by Marriott. It was down graded 3 times this year and I was slightly worried it could default.


What made you worry? Were the financials that bad or general concern for COVID impacted businesses? I would think Marriott could find a way to avoid default.
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Old 07-07-2020, 07:51 AM   #15
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Have muni callable in '23 at 5% & another at 4.5% callable in '25. We'll see.
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Old 07-07-2020, 08:48 AM   #16
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Slightly worried as it was down graded so far so fast all because of Covid. I've been moving my FI to FUAMX for safety. This was my last stand alone corporate. I don't expect Marriott will be declaring bankruptcy soon, but how many thought Hertz would?
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Old 07-07-2020, 02:03 PM   #17
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Slightly worried as it was down graded so far so fast all because of Covid. I've been moving my FI to FUAMX for safety. This was my last stand alone corporate. I don't expect Marriott will be declaring bankruptcy soon, but how many thought Hertz would?


Gotcha, but I think Hertz has been troubled for awhile and MAR’s unique structure could shelter them from the worst outcome I guess
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