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Old 01-24-2023, 11:52 AM   #2541
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What rates do you see trending up?
Rates peaked in late Oct and have trended down since, which is one driver of the rally in equities.
All rates are in an uptrend for the past year. Take a look at the charts. Dumb Wall Street bond traders also bid up rates last July only to get clobbered in October. They are making the same mistake again. Don't assume that Wall Street bond traders are the best and brightest. They are the same idiots that bought 10 year notes at 0.6% coupons in 2021. They risk other peoples money not their own capital. Buying 10 year notes at 3.5% is absolutely insane. The grim reality is that the funds they are buying for have average coupons of 2-2.8% and they are desperately attempting to drive rates down to stop investors from dumping their loser funds.
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Old 01-24-2023, 12:06 PM   #2542
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Originally Posted by Freedom56 View Post
All rates are in an uptrend for the past year. Take a look at the charts. Dumb Wall Street bond traders also bid up rates last July only to get clobbered in October. They are making the same mistake again. Don't assume that Wall Street bond traders are the best and brightest. They are the same idiots that bought 10 year notes at 0.6% coupons in 2021. They risk other peoples money not their own capital. Buying 10 year notes at 3.5% is absolutely insane. The grim reality is that the funds they are buying for have average coupons of 2-2.8% and they are desperately attempting to drive rates down to stop investors from dumping their loser funds.
I've seen a broad-based view from many that rates have peaked for the intermediate-term bonds, but I love the fact that you are consistently taking an opposite position. Will be interesting to see what happens over the next few months.
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Old 01-24-2023, 12:40 PM   #2543
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I've seen a broad-based view from many that rates have peaked for the intermediate-term bonds, but I love the fact that you are consistently taking an opposite position. Will be interesting to see what happens over the next few months.
I was a heavy buyer in March 2020 but when rates went to zero in late 2020 through 2021, bonds, CDs, were not investible and I stopped buying. However, Wall Street fixed income traders continued to buy and their funds are now loaded up with low coupon debt. Right now buying low coupon bonds over 10 year duration is total insanity. I'm having lunch tomorrow with a Goldman Sachs fixed income VP. I'll get his perspective even though he focusses primarily in the Muni bond market.
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Old 01-24-2023, 12:42 PM   #2544
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I've seen a broad-based view from many that rates have peaked for the intermediate-term bonds, but I love the fact that you are consistently taking an opposite position. Will be interesting to see what happens over the next few months.
Yes we've seen "a" peak, but not necessarily "the" peak. At this point, I'm just laddering out 6-10 years and I'm including MYGA's in my FI ladder.
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Old 01-24-2023, 04:04 PM   #2545
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Just opened a 17 month CD at 5% at my credit union.
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Old 01-24-2023, 04:13 PM   #2546
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Had a 5.95% GSE bond I bought 6 weeks ago called this morning.
No notice (that I noticed). The funds were sitting in pending this morning for a redemption dated today.
Went to find a replacement. New issues had a 5.65% GSE with very similar maturity but when I went to buy Fido said my qty was greater than # available.
So I surf the secondary market and find the same bond at 99.90 and a 0.10 fee making it $100 even... same as if I had bought it "new".
I suspect all of my callables are going to vaporize as on the first call date. I'm going to start laddering non-callables out to 2032. They're only 4%, but that 4% looked good back when rates were zip.
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Old 01-24-2023, 04:22 PM   #2547
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I have callables past their call dates. Coupons are 4.8% to low 5%.
I stress tested my callable bonds. If all get called, based on reinvesting funds close to 5%, I will lose $7000 a year in income. Not worth worrying about. I am way over funded.
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Old 01-24-2023, 04:59 PM   #2548
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Originally Posted by Freedom56 View Post
All rates are in an uptrend for the past year. Take a look at the charts. Dumb Wall Street bond traders also bid up rates last July only to get clobbered in October. They are making the same mistake again. Don't assume that Wall Street bond traders are the best and brightest. They are the same idiots that bought 10 year notes at 0.6% coupons in 2021. They risk other peoples money not their own capital. Buying 10 year notes at 3.5% is absolutely insane. The grim reality is that the funds they are buying for have average coupons of 2-2.8% and they are desperately attempting to drive rates down to stop investors from dumping their loser funds.
I would be curious how you think rates, outside the 1 year and less, can rise once again.

The reason rates have turned down is the rate of inflation has declined.

If Fed continues to raise we get recession and even lower mid to long rates.

For rates to rise above the October highs, we need the Fed to suddenly stop raising, inflation to spike, and the Fed to ignore this. I do not see that happening and, since you place a lot of trust in the Fed, I assume you don't either since JPowell has been resolute in fighting inflation. He does not want to be the Arthur Burns of the new millennium.

You deride bond traders but most market observers do not share your view that they are "dumb". Quite the contrary.

And many observers have said the market usually wins. And the market is saying lower.

And by the way, even the Fed dot plots see rate cuts in 2024, and that is less than a year away.

The market knows this.

The market could change, as anything can happen but why mischaracterize where we sit today?
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Old 01-24-2023, 06:22 PM   #2549
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I suspect all of my callables are going to vaporize as on the first call date. I'm going to start laddering non-callables out to 2032. They're only 4%, but that 4% looked good back when rates were zip.
I don't have any short-term callable, so I'm assuming that the majority of my callable bonds will get called on the first call date. The interest rates definitely have gone down for 5-year bonds over the last few months and I'm not counting on them spiking up.

I think some people are in a position where they are fine with calls and are more interested in higher short-term yields and less concerned with reinvestment risk. This is a great time for them.

There are others who are more concerned with reinvestment risk and preservation of capital. If someone is more comfortable locking in longer rates, that is what is right for them. I'm not willing to go out for ten years for most corporate bonds because of the risk. (For lower risk bonds, like the Canadian banks, I am willing to buy a bit of those if they are available and aren't callable for at least a few years. )

I would like some four or five year bonds for my ladder, but there aren't many good ones. Some bank CDs are offering better yields than non-callable bonds and without the risk. I'm not sure who is buying those bonds. Even the corporate bonds with three-year call protection don't offer much of a premium over what 3-year bank CDs are offering.
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Old 01-24-2023, 07:55 PM   #2550
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I have a question about U.S. Treasuries..I've been buying some lately and I've noticed that when I place my order the cost comes up as a number less than the amount I am buying. For example if I buy $25,000.00 worth the cost will be something over $24,000.00 but less than $25,000.00..I thought that was the way zero's worked..These I am buying are not zero's but are priced like zero's as far as I can tell..I would expect a $25,000.00 treasury to cost $25,000.00..What's the deal?
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Old 01-24-2023, 07:59 PM   #2551
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I have a question about U.S. Treasuries..I've been buying some lately and I've noticed that when I place my order the cost comes up as a number less than the amount I am buying. For example if I buy $25,000.00 worth the cost will be something over $24,000.00 but less than $25,000.00..I thought that was the way zero's worked..These I am buying are not zero's but are priced like zero's as far as I can tell..I would expect a $25,000.00 treasury to cost $25,000.00..What's the deal?
You are buying these on the secondary market below par, correct?
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Old 01-24-2023, 08:00 PM   #2552
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You are buying these on the secondary market below par, correct?
Yes through the Schwab listings
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Old 01-24-2023, 08:14 PM   #2553
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Yes through the Schwab listings
When you buy below par, the price is less than $1000 a bond. So when you enter 25 bonds, the price is $900 ish so your total is less than $25,000. Part of your return is interest and part is capital gains - the difference between par and the price you paid.
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Old 01-24-2023, 08:14 PM   #2554
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okay...I figured it out..Those priced below par will be cheaper and those priced above par will cost more..Price and coupon are the variables..
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Old 01-24-2023, 08:16 PM   #2555
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When you buy below par, the price is less than $1000 a bond. So when you enter 25 bonds, the price is $900 ish so your total is less than $25,000. Part of your return is interest and part is capital gains - the difference between par and the price you paid.
Thanks! I sure hope Schwab keeps up with all that and simplifies it for tax purposes..
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Old 01-24-2023, 09:39 PM   #2556
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okay...I figured it out..Those priced below par will be cheaper and those priced above par will cost more..Price and coupon are the variables..
Coupon is usually not a variable, it is fixed. Price is variable. As interest rates rise, the price falls and vice versa. If you buy below 100 then the yield to maturity will exceed the coupon (including zeros) and if you buy above 100 your yield to maturity will be less than the coupon.
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Old 01-25-2023, 07:42 AM   #2557
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New call this morning. At 6.45% I never thought that it would last long before being called. C'est la vie!

SecurityFFCB 6.45%37
DUE 10/19/37
CUSIP3133ENU24
Maturity dateJanuary 24, 2023
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Old 01-25-2023, 09:09 AM   #2558
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New call this morning. At 6.45% I never thought that it would last long before being called. C'est la vie!

SecurityFFCB 6.45%37
DUE 10/19/37
CUSIP3133ENU24
Maturity dateJanuary 24, 2023
Oh, well...I netted ~$50 on my position. Could've been worse.
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Old 01-25-2023, 09:16 AM   #2559
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New call this morning. At 6.45% I never thought that it would last long before being called. C'est la vie!

SecurityFFCB 6.45%37
DUE 10/19/37
CUSIP3133ENU24
Maturity dateJanuary 24, 2023
Owned the same one. Made $255 in interest. Reinvested the funds already yesterday.
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Old 01-25-2023, 09:38 AM   #2560
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I have callables past their call dates. Coupons are 4.8% to low 5%.
I have FHLB 5% 10/25/2024 callable bonds (CUSIP 3130ATHG5) with the first call date today (subsequent call dates are every 3 months from today). Apparently they are going to live for another 3 months as I have gotten no notice of call. If they got called it wouldn't be a disaster as I can reinvest in 6-month T-bills which recently have been yielding about 4.85% at auction.
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