Fixed Income Investing II

[dobig]

Truth be told I don’t touch 99% of my ladder even with big profits in mark to market prices. I want the income.
I buy flyers from time to time for fun. Usually lower investment grade because they are so liquid. Make a few hundred bucks. It’s just a game to me.

Ok, that makes sense. I was wondering why someone in your position would be messing around.

 

[COcheesehead]

Which means the nav on our bonds and notes should be pretty happy no?

Yes!

 

[COcheesehead]

Ok, that makes sense. I was wondering why someone in your position would be messing around.

I don’t think I have ever flipped anything in my taxable account. That is the source of our retirement paycheck. The games are played in deferred accounts. It’s really hard to lose trading bonds unlike stocks. As you wait for the market to come to you, you are accruing daily interest. The value you see on your screen is only part of the picture.

 

[dobig]

Yes!

lol


Not sure why everyone's so gloomy. I'm cleaning out the wheelbarrow for all the money I'm making.

 

[Montecfo]

Which means the nav on our bonds and notes should be pretty happy no?

Yes. And even (whispering) bond funds will rally.

 

[Koolau]

If my wife ever has to take this over, it's going to need significant simplication.

This has been one of my main goals (even setting up my portfolio.) DW doesn't understand much about investing and she exhibits even less little interest. (But she is a very intelligent woman.) "Do we have enough?" she will ask me. That's what she's interested in. So, I'm trying to adjust my port. to make it more simple. I'm sure I lose out on some potential gains that way, but at my age, I have to be "ready" to pass the torch to DW. YMMV

 

[G-Man]

I don’t think I have ever flipped anything in my taxable account. That is the source of our retirement paycheck. The games are played in deferred accounts. It’s really hard to lose trading bonds unlike stocks. As you wait for the market to come to you, you are accruing daily interest. The value you see on your screen is only part of the picture.

Maybe you should have some lessons on trading bonds. I would like to learn more about it.

 

[COcheesehead]

Maybe you should have some lessons on trading bonds. I would like to learn more about it.

It’s one of those things that when you start to explain it to someone and it seems so simple to you, but then you realize you have accumulated a bunch of experience that just becomes second nature and to someone else its like drinking from a fire hose.

 

[G-Man]

It’s one of those things that when you start to explain it to someone and it seems so simple to you, but then you realize you have accumulated a bunch of experience that just becomes second nature and to someone else its like drinking from a fire hose.

Where do I start? Any recommendations?

 

[aja8888]

Where do I start? Any recommendations?

Start here:

Investopedia

https://www.investopedia.com/financial-edge/0312/the-basics-of-bonds.aspx

 

[COcheesehead]

Where do I start? Any recommendations?

Look for issues with liquidity. Some bonds just don’t trade. Look at depth of book. If there are lots of bids and asks, you’ll know you can trade it. I also look at yield tables everyday. If the same bonds keep showing up, not usually a good sign. Read the issuer events to avoid potholes.

 

[Koolau]

It’s one of those things that when you start to explain it to someone and it seems so simple to you, but then you realize you have accumulated a bunch of experience that just becomes second nature and to someone else its like drinking from a fire hose.

Reminds me of 10 year old grand son asking me about flying. I realized the basic stuff I was telling him was like the fire hose you mentioned. "Spoon feed" is the key - not easy to do when you know a lot.

 

[dobig]

Yes. And even (whispering) bond funds will rally.

Montecfo I was wondering about that and you have been hinting at this for awhile. On Monday bought a good chunk of Vanguard Wellington and Wellesley because of their bond holdings. Would like to push more into some good bond funds that have been beaten up and may rally if anyone has suggestions. I would think longer duration bond funds might have the better upside but I have little experience here.

 

[Koolau]

Montecfo I was wondering about that and you have been hinting at this for awhile. On Monday bought a good chunk of Vanguard Wellington and Wellesley because of their bond holdings. Would like to push more into some good bond funds that have been beaten up and may rally if anyone has suggestions. I would think longer duration bond funds might have the better upside but I have little experience here.

A good portion of my bonds are in Wellesley. Heh, heh, that way I don't have to rebalance. The remainder are in Vanguard bond funds. Those, I have to rebalance.

 

[Montecfo]

Montecfo I was wondering about that and you have been hinting at this for awhile. On Monday bought a good chunk of Vanguard Wellington and Wellesley because of their bond holdings. Would like to push more into some good bond funds that have been beaten up and may rally if anyone has suggestions. I would think longer duration bond funds might have the better upside but I have little experience here.

Yes, I would consider bond only funds. Wellesley and Wellington have been great kind of "one fund" solutions. But if you want to adjust the dials yourself you need bonds.

Morningstar is your best source. You do not have to subscribe as there is a lot of free content. Your brokerage site will have material too just as on stocks.

Open end Bond funds do not work well at times of dramatic changes in rates but work well under most market conditions. Closed end bond funds can be a better bet in some cases because investments in closed end funds do not trigger buying or selling of underlying securities held by the funds, which occurs with open end mutual funds. But watch out for leverage as many closed end funds use it.

Bond funds and individual bonds are tools. Each has its place.

 

[Mulligan]

Yields not looking real good today post the CPI release. I fear we are going to see lower rates and more inverted middle of the curve.

The 2, 5 and 10 year Treasury yields have dropped sharply this week.

We never have really come close to opportunities we had last fall in the long end of bond market. So I pretty much have a full 2031-35 position Im will to take. Glad I jumped in. Took advantage of recent slide yesterday in KTH which is a 2028 noncallable maturity trust debt from PECO (Philadelphia Electric) for about a 6.5% YTM.

 

[imbatman]

fair enough, sorry for sharing

 

[Koolau]

https://www.wsj.com/articles/the-bond-market-gets-less-scary-ac9fd5a6

It is generally considered less useful to show a naked citation without describing what is contained in the citation. Some are even concerned about clicking on something they know nothing about.

I notice that it's from WSJ which is usually behind a pay wall. That makes it even more important to mention what is there since many will not be able to read it.

Word to the wise.

 

[G-Man]

Can bonds be used as short-term fixed income? Meaning flipping the bond before it's maturity date if that's possible.

 

[COcheesehead]

Can bonds be used as short-term fixed income? Meaning flipping the bond before it's maturity date if that's possible.

Yes, of course, but choose wisely. Liquidity is your friend.

 

[COcheesehead]

We never have really come close to opportunities we had last fall in the long end of bond market. So I pretty much have a full 2031-35 position Im will to take. Glad I jumped in. Took advantage of recent slide yesterday in KTH which is a 2028 noncallable maturity trust debt from PECO (Philadelphia Electric) for about a 6.5% YTM.

Last Fall for taxable bonds was so far the best. I had really good luck with longer term munis in June of ‘22 too. Everything on the long ish end is now lower.

 

[imbatman]

just watch out for de minimis rule on munis if you are buying them at a discount and trying to not have cap gains in a taxable account

https://www.pimco.com/en-us/resources/education/understanding-the-de-minimis-tax-rule

 

[Aerides]

fair enough, sorry for sharing

Sharing is fine, even if behind a paywall (most of us know that all WSJ stuff is). But we do ask that members provide a snippet or summary, vs. just a "naked link". or just, say "look at this <link>"

A line or three in your own words, perhaps even a short quote, to give the other thread readers the gist of the thing before clicking, is the sweet spot.

 

[COcheesehead]

just watch out for de minimis rule on munis if you are buying them at a discount and trying to not have cap gains in a taxable account

https://www.pimco.com/en-us/resources/education/understanding-the-de-minimis-tax-rule

Fidelity warns you when you are about to buy a below par muni. Usually the ones that trade below par have poor coupons. I usually buy 5%-6% coupons because I want the cashflow.

 

[Montecfo]

We never have really come close to opportunities we had last fall in the long end of bond market. So I pretty much have a full 2031-35 position Im will to take. Glad I jumped in. Took advantage of recent slide yesterday in KTH which is a 2028 noncallable maturity trust debt from PECO (Philadelphia Electric) for about a 6.5% YTM.

Congrats!

Yes I agree. It seems like the little upticks we have had in yields since then have just been stairsteps on the way down, to the consternation of some.

Mulligan, you are definitely one of the most experienced guys here. If you wished to share some of your ideas closer to your trade I'm sure many would appreciate it.