We are entering a "Golden Period" for fixed income investing

[Family]

Quote:

Originally Posted by Golden sunsets I'll be interested to see the response to this post, as I posted something similar on purchasing a treasuey bond with a low coupon at a discount, assuming the discount would be treated as a LTCG and was told that all of the discount would be treated as interest income in the year of maturity, not LTCG. Sent from my SM-T510 using Early Retirement Forum mobile app

Per Investopedia:
"Municipal Bonds and Capital Gains
When buying munis on the secondary market, investors must be aware that bonds purchased at a discount (less than par value) will be taxed upon redemption at the capital gains rate. Note that this tax does not apply to coupon payments, only the principal of the bond.

Investopediahttps://www.investopedia.com › Bonds › Municipal Bonds"

[COcheesehead]

Quote:

Originally Posted by Golden sunsets I'll be interested to see the response to this post, as I posted something similar on purchasing a treasuey bond with a low coupon at a discount, assuming the discount would be treated as a LTCG and was told that all of the discount would be treated as interest income in the year of maturity, not LTCG. Sent from my SM-T510 using Early Retirement Forum mobile app

I answered the question in the muni bond thread and FYI, it only applies to muni bonds because of their tax free nature. A below par purchase of a muni may trigger a taxable event upon maturity.

[Rianne]

Quote:

Originally Posted by finnski1 At that price you could buy 546 bonds at $1000 face value for a purchase price of approx $599,535.3 (546*1098.05)+ any commission? you would receive $36,172.5 (546 *66.25 per bond)in interest each year. you would then get (546*1000)= $546,000 at maturity because you paid over par($100) for each bond. They redeem at par upon maturity. So I believe you would get a total of approximately 546,000+36,172.5+36,172.5+36,172.5+36,172.5+ however they calculate the payment for the last 3 months (11/15/22 to Feb 15/27) of which I'm not sure how it works or if you even get that. Somebody more well versed can probably answer that. So $690.690 + that last bit(3 months worth)-any prepaid interest from the first 6 month payout- any commissions. I'm guessing right around $700.000 total. Don't quote me on that.

That makes sense, thanks! But where does the 4.038% come in? I'm buying at a premium of 6.375% (36,172/year) cash flow per year. This is our buyout from the pension. With that coupon, we'll have more than the pension annuity payment and keep our principal.

[COcheesehead]

Quote:

Originally Posted by Rianne That makes sense, thanks! But where does the 4.038% come in? I'm buying at a premium of 6.375% (36,172/year) cash flow per year. This is our buyout from the pension. With that coupon, we'll have more than the pension annuity payment and keep our principal.

You do not get the premium back so your yield to maturity is less than the coupon. You are paying a “price” for cashflow. Your real total return is only 4.038% at maturity.

[Rianne]

Quote:

Originally Posted by COcheesehead You do not get the premium back so your yield to maturity is less than the coupon. You are paying a “price” for cashflow. Your real total return is only 4.038% at maturity.

No complaints here. We'll do something similar to that scenario next month. Maybe the golden period will be even better. I appreciate the discussion because there's an hour's wait to talk to the bond desk at VG. If I know what I'm doing, I won't have to talk to them and simply buy the treasury.

[Fermion]

Looks like bond prices dropped a decent bit yesterday...maybe some good deals this coming week...back to the 6% CDs.

[Sunset]

Quote:

Originally Posted by lordjust I think this one might interest people, 17330YDC1 5.2% Citigroup for 1 year and it appears non-callable

Most bonds I've seen lately, even if callable, are non callable for the 1st year.

Hopefully rates move up again, or I'll really regret not buying more of my long term GS 7% bond which is callable every year.

[ShokWaveRider]

Quote:

Originally Posted by Fermion Looks like bond prices dropped a decent bit yesterday...maybe some good deals this coming week...back to the 6% CDs.

Love to see where you are getting 6% CDs. None on Schwab.

[lordjust]

Quote:

Originally Posted by Sunset Most bonds I've seen lately, even if callable, are non callable for the 1st year. Hopefully rates move up again, or I'll really regret not buying more of my long term GS 7% bond which is callable every year.

was that the 6.75% one? If yes, ya i am with you on that one. . You could always jump in on the one below and gamble they call it at some point or just leave your money locked up.

3133ENY95

[Freedom56]

Quote:

Originally Posted by lordjust was that the 6.75% one? If yes, ya i am with you on that one. . You could always jump in on the one below and gamble they call it at some point or just leave your money locked up. 3133ENY95

There was Citigroup 6.1% 2027 note:

CITIGROUP GLOBAL MKTS HLDGS IN SER N
6.10000% 11/17/2027 MTN rated A2/A that I bought after the inflation report came out. It has a slightly lower coupon than the GS notes at 6.75% and 6.625 that I also own but it has 2 years call protection.

The CUISIP is: 17330YFF2

[lordjust]

Quote:

Originally Posted by Freedom56 There was Citigroup 6.1% 2027 note: CITIGROUP GLOBAL MKTS HLDGS IN SER N 6.10000% 11/17/2027 MTN rated A2/A that I bought after the inflation report came out. It has a slightly lower coupon than the GS notes at 6.75% and 6.625 that I also own but it has 2 years call protection. The CUISIP is: 17330YFF2

I dont see anyone listing this one for sale on the secondary market (yet) but 2 years would be good to lock in a yield. The one I listed is definitely not ideal but there is a listing for it.

[Sunset]

Quote:

Originally Posted by lordjust was that the 6.75% one? If yes, ya i am with you on that one. . You could always jump in on the one below and gamble they call it at some point or just leave your money locked up. 3133ENY95

It was 38150APU3 Goldman Sachs 10 year bond at 7%

It's gone up in value as folks expect rates to go down , I bought at 100%
Now I wish I had bought more... Greedy I guess

https://finra-markets.morningstar.co...mbol=GS5493913

[Freedom56]

Quote:

Originally Posted by Sunset It was 38150APU3 Goldman Sachs 10 year bond at 7% It's gone up in value as folks expect rates to go down , I bought at 100% Now I wish I had bought more... Greedy I guess https://finra-markets.morningstar.co...mbol=GS5493913

It's better just to buy the best deals you find every month and ladder in. Your dry powder now earns 3.8% so it's not like the .01% that they were earning a year ago.

[Freedom56]

Quote:

Originally Posted by lordjust I dont see anyone listing this one for sale on the secondary market (yet) but 2 years would be good to lock in a yield. The one I listed is definitely not ideal but there is a listing for it.

It's definitely trading on the secondary market but at $101 and change.

https://finra-markets.morningstar.co...11%2F20%2F2022

[lordjust]

Quote:

Originally Posted by Freedom56 It's definitely trading on the secondary market but at $101 and change. https://finra-markets.morningstar.co...11%2F20%2F2022

why would YTW for 3133ENY95 be 4.982% ? I am seeing a price of 100.90000 for the offering.

[Freedom56]

Quote:

Originally Posted by lordjust why would YTW for 3133ENY95 be 4.982% ? I am seeing a price of 100.90000 for the offering.

It was issued a few weeks ago and it's callable in 6 months.

[lordjust]

Quote:

Originally Posted by Freedom56 It was issued a few weeks ago and it's callable in 6 months.

ah!... thanks

[conversationalphrase]

This new issue Goldman Sachs Step-Up bond looks like a good opportunity, although it doesn't mature until 2029:


CUSIP: 38150AQB4

[Freedom56]

Quote:

Originally Posted by conversationalphrase This new issue Goldman Sachs Step-Up bond looks like a good opportunity, although it doesn't mature until 2029: CUSIP: 38150AQB4

It looks okay with 18 months call protection but the prior issues were a bit better. I would wait for Powell to open is mouth again or the next market downturn. That should spike yields up again.

[Freedom56]

JP Morgan appears to be signaling that rates will stay high through at least the end of 2024 with their new retail issue. It is available at TDA. Fidelity has not listed this one yet.

JPMORGAN CHASE &CO SER E MTN
5.40000% 11/30/2026
CUSIP: 48130CAA3

The yield is slightly lower than their recent prior issues but now they have call protection through 11/30/ 2024. This is a bank that has no problems attracting investors and has been timing this rate cycle pretty nicely. In July 2021, JP Morgan announced that they elected to hoard their cash balances ($500 billion at the time) instead of investing in treasuries at record low yields. The CEO of JP Morgan correctly stated that there was too much risk in investing their cash in treasuries at record low yields as the expected the Fed to raise rates. So you have to wonder why the largest and best managed bank in this country now starting to extend first call dates out two years.