Fixed Income Investing II

[Montecfo]

Well I certainly don't want to stretch for yield by going lower quality or callable. I understand folks who are mostly or all debt may find that attractive for a sliver, but my equity portfolio is where I am taking risk.

[Montecfo]

Quote:

Originally Posted by COcheesehead For the high risk end of my bond portfolio I have been buying bits and pieces of WDI, a closed end, leveraged, bond fund. It holds some of everything, but a good portion of floaters. So it yields about 12% which looks sustainable because it’s earning 106% of its distribution and earnings are increasing. It is also selling at a discount to its NAV. It’s up 8%+ in the last year. I have about 4% of my bond allocation in it. I also have been buying LONZ, 8% yield, short duration junk, up 9% plus, no leverage. Those two are balanced off with the other 95% of my bonds in high quality, mostly non callable, laddered individual bonds.

I do think closed end bond funds are attractive here. With rates near their highs and trading at a discount, what is not to like?

[pb4uski]

Quote:

Originally Posted by Montecfo Well I certainly don't want to stretch for yield by going lower quality or callable. I understand folks who are mostly or all debt may find that attractive for a sliver, but my equity portfolio is where I am taking risk.

WADR, I don't view buying BBB+ corporates as being much of a stretch.

The historical rate of default of BBB+ corporate bonds is 1% and the recovery rate on default is about 80%, so the loss is 0.2%.

If you think 0.2% is a stretch, then let's agree to disagree.

Besides, I don't think that Goldman will be the 1 of 1,000 BBB+ bonds that end up defaulting.

[Gumby]

I think when it comes down to the last dollar to be made, Goldman will be the one making it.

[Montecfo]

Quote:

Originally Posted by pb4uski WADR, I don't view buying BBB+ corporates as being much of a stretch. The historical rate of default of BBB+ corporate bonds is 1% and the recovery rate on default is about 80%, so the loss is 0.2%. If you think 0.2% is a stretch, then let's agree to disagree. Besides, I don't think that Goldman will be the 1 of 1,000 BBB+ bonds that end up defaulting.

I'm not looking to debate that. You have a greater risk tolerance for all or a portion of your bond portfolio.

I stated my philosophy previously, and sticking to it.

But I'm not a verse to credit risk. I in the past have held junk bonds, for example, just not as part of my bond allocation. Because they act like equities.

Not saying low investment grade is equivalent to junk, just discussing my philosophy.

ETA: also, any individual bond carries too much weight in my portfolio for me to be willing to assume much risk. If I want to look at higher risk categories, I would generally look for those in a fund that will hold hundreds or thousands of bonds.

And I do.

[COcheesehead]

Quote:

Originally Posted by Montecfo I do think closed end bond funds are attractive here. With rates near their highs and trading at a discount, what is not to like?

A timely article in Seeking Alpha about the attractiveness of the bond CEF WDI which I posted about up thread.

https://seekingalpha.com/article/463...solid-coverage

[Texas Proud]

Quote:

Originally Posted by COcheesehead A timely article in Seeking Alpha about the attractiveness of the bond CEF WDI which I posted about up thread. https://seekingalpha.com/article/463...solid-coverage

Might have to look at this... My SPLP-A has a huge gain so the current yield is not that attractive and I have been looking for something to move it too... it also matures in a few years so going out a bit looks promising...