Fixed Income Investing

[Bossman]

Have some cash to invest and looking for the best fixed income opportunities that have little to no risk (other than inflation risk). Currently the money is in a Fidelity ETF (FDRXX) that has a current yield of 4.77%. My thought process is that it would be best to invest in medium term CDs (15-36 months) that are not callable and pay monthly interest. Picked up my first tranche of brokered CDs at 5.2%, 18 months offered by Wells Fargo. Fidelity does not provide any automated alerts to monitor CD rates, so at this point I am monitoring them daily although they can actually change on the hour. I am looking for input on the following:

1. Are there any automated tools (scripts, browser add-ons, etc.) that exist to monitor CD rates and can send alerts when certain thresholds are met?

2. What is the best website that shows the highest CD rates? It use to be Bankrate.com, but it is a shadow of its former self. I have found a new website (https://www.monitorbankrates.com/cd-rates) that shows a wide variety of financials offering CD rates, but it does not provide enough specifics of the CD offerings.

3. Lastly, there are Federal (and state) agency bonds that are currently offering close to 6% (most are callable). Is this a viable alternative to CDs that I should pursue?

Thanks for any input.

 

[Montecfo]

Depositaccounts.com is a great site for best banking rates of all sorts.

But your brokers bond investment pages will let you search for brokered CDs. That's another option.

 

[pb4uski]

... 3. Lastly, there are Federal (and state) agency bonds that are currently offering close to 6% (most are callable). Is this a viable alternative to CDs that I should pursue?

Thanks for any input.

Yes. While in theory GSEs have slightly more credit risk than UST and FDIC insured CDs, the difference is so negligible that IMO it can be easily ignored.

You can do a search for noncallable or also for callable but with low coupon rates which are less ikely to be called if you want to avoid call risk.

I also look at highly rated corporate bonds (A2 or better from Moody's or A or better from S&P) if the yields are attractive. Currently there are a few 3-5 year term 6% yielders from TD Bank (A1/A) and Bank of Montreal (A2/-) which I wish I had some dry powder to buy.

 

[Bossman]

Yes. While in theory GSEs have slightly more credit risk than UST and FDIC insured CDs, the difference is so negligible that IMO it can be easily ignored.

You can do a search for noncallable or also for callable but with low coupon rates which are less likely to be called if you want to avoid call risk.

I also look at highly rated corporate bonds (A2 or better from Moody's or A or better from S&P) if the yields are attractive. Currently there are a few 3-5 year term 6% yielders from TD Bank (A1/A) and Bank of Montreal (A2/-) which I wish I had some dry powder to buy.

Thanks for the input. All GSE's that had competitive rates to the highest CDs were callable, so I will pass on that option. For now, I am going to avoid highly rated corporate bonds, especially those from Banks. Too many black swans and too much commercial property debt make Bank corporate bonds too risky for me.

I will solely focus on Treasuries and CDs for my cash. Although I am not a market timer, I sold a sizable chunk of my equity position just this past Friday and plan to hunker down for the next few years.

 

[Toast]

Depositaccounts.com is a great site for best banking rates of all sorts.

Best site I’ve seen. Thanks for sharing.

 

[ReadyNotReady]

check out Western State Bank - 5.15% High Yield Money Market. Pays monthly and you have access to your cash. https://apps.westernbanks.com/

 

[Montecfo]

Thanks for the input. All GSE's that had competitive rates to the highest CDs were callable, so I will pass on that option. For now, I am going to avoid highly rated corporate bonds, especially those from Banks. Too many black swans and too much commercial property debt make Bank corporate bonds too risky for me.



I will solely focus on Treasuries and CDs for my cash. Although I am not a market timer, I sold a sizable chunk of my equity position just this past Friday and plan to hunker down for the next few years.

Most Agency bonds are callable but you might search for noncallables.

I bought some recently and may look to buy more.

 

[COcheesehead]

Most Agency bonds are callable but you might search for noncallables.

I bought some recently and may look to buy more.

It depends how you purchase them and for what purpose.
You can get competitive yields on agency bonds if purchased on the secondary market at below market coupons. So the interest income is less, but they are sold below par so some of your return is in the form of returning to par. Lower coupon agency bonds are less likely to be called. I own some shorter duration ones and will hold to maturity. You still make money, one way or another.

 

[Montecfo]

It depends how you purchase them and for what purpose.

You can get competitive yields on agency bonds if purchased on the secondary market at below market coupons. So the interest income is less, but they are sold below par so some of your return is in the form of returning to par. Lower coupon agency bonds are less likely to be called. I own some shorter duration ones and will hold to maturity. You still make money, one way or another.

It is an excellent point. Low coupon agencies trade at a discount. If called at par you essentially got your return early.

I am going to need to target those.

 

[imbatman]

Yeah, I enjoy buying at a discount to get an advance on my interest so I can play with it now. However, I am normally buying agencies/ GSEs in my taxable account to try and avoid taxes on my brutal 8.5% state/local rate.....and buying at much of a discount can end up cancelling out tax benefits for things like municipal bonds/ agency / gses because they normally recapture the discount as a capital gain (instead of as the advance interest income it really is, which isn't taxed if you earned it normally).