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Old 11-23-2022, 06:19 PM   #1541
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Originally Posted by Vincenzo Corleone View Post
cusip?
i think he grabbed the same one i did
38150APM1
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Old 11-23-2022, 06:23 PM   #1542
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Originally Posted by Vincenzo Corleone View Post
cusip?
38150APM1

It was issued at the end of October 2022. I believe many people here bought this one or the 10 year 7% notes from Goldman Sachs during the same week. At $215,000,000.00, the Goldman Sachs 6.75% offering was one of the largest retail corporate note issues this year.
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Old 11-23-2022, 06:31 PM   #1543
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Originally Posted by lordjust View Post
i think he grabbed the same one i did
38150APM1
Looks like you got it at offering..The one I'm looking at is CUSIP 38150AQ99.
I never see any at Schwab that are as attractive as those Freedom is able to get.
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Old 11-23-2022, 06:31 PM   #1544
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The new note deals are not flying off the shelf like they did over a week ago. Investors are looking for that leading 6 digit coupons or a lower yield with longer call protection. Call protected CDs with leading 5 digit coupons are gone but if the Fed sticks with their plan, they should return.
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Old 11-23-2022, 06:37 PM   #1545
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Originally Posted by lawman View Post
Looks like you got it at offering..The one I'm looking at is CUSIP 38150AQ99.
I never see any at Schwab that are as attractive as those Freedom is able to get.
the 6.75 was a Schwab one as well but you are correct, i bought it at offering and i am also looking at Q99 too
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Old 11-23-2022, 07:38 PM   #1546
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I have gone through several pages of posts regarding individual bonds. There have been several posts regarding corporate bonds paying 6.75% or so. In my tax bracket in NJ - that equates to 4.07% after tax. I have been invested in MUE since the beginning of this year which has an after tax yield of 4.66%. In my financial position, I think Muni bonds make more sense on an after tax basis. I have been looking at individual muni bonds (2032 maturity) with an after tax YTM of 4.3%. I know most investors avoid bond funds but it seems to be the best yield and more diversification than i can do on my own. Thoughts?
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Old 11-23-2022, 08:03 PM   #1547
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What’s the cusip for the 10 year 7% Goldman Sachs?
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Old 11-23-2022, 08:18 PM   #1548
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Originally Posted by OnTheBeach View Post
I have gone through several pages of posts regarding individual bonds. There have been several posts regarding corporate bonds paying 6.75% or so. In my tax bracket in NJ - that equates to 4.07% after tax. I have been invested in MUE since the beginning of this year which has an after tax yield of 4.66%. In my financial position, I think Muni bonds make more sense on an after tax basis. I have been looking at individual muni bonds (2032 maturity) with an after tax YTM of 4.3%. I know most investors avoid bond funds but it seems to be the best yield and more diversification than i can do on my own. Thoughts?

What about the price drop of MUE since the beginning of the year?
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Old 11-23-2022, 08:20 PM   #1549
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I have gone through several pages of posts regarding individual bonds. There have been several posts regarding corporate bonds paying 6.75% or so. In my tax bracket in NJ - that equates to 4.07% after tax. I have been invested in MUE since the beginning of this year which has an after tax yield of 4.66%. In my financial position, I think Muni bonds make more sense on an after tax basis. I have been looking at individual muni bonds (2032 maturity) with an after tax YTM of 4.3%. I know most investors avoid bond funds but it seems to be the best yield and more diversification than i can do on my own. Thoughts?
MUE is a leveraged closed end fund (CEF). It was trading at $13 at the beginning of this year and it's trading at just over $10 now. So the distribution is moot given the unrealized capital loss. I personally have nothing against CEFs but buying them early in the year was bad timing. You really want to buy leveraged CEFs about one month before the last rate hike. Many of these CEFs are deleveraging as borrowing costs far exceed coupon rates of the securities they hold.
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Old 11-23-2022, 08:59 PM   #1550
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What’s the cusip for the 10 year 7% Goldman Sachs?
38150APU3,
38150APQ2,

not sure which one you are referring to... but a quick search of
https://finra-markets.morningstar.co...er/Results.jsp

showed the above 2
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Old 11-24-2022, 09:15 AM   #1551
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I personally have nothing against CEFs but buying them early in the year was bad timing. You really want to buy leveraged CEFs about one month before the last rate hike. Many of these CEFs are deleveraging as borrowing costs far exceed coupon rates of the securities they hold.
You make a good point, that I would take a step further: you can probably be looking at CEF's to buy at a discount as we reach the end of the hiking cycle, if you like and understand these funds. Now is not too early to begin looking.
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Old 11-24-2022, 10:22 AM   #1552
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You make a good point, that I would take a step further: you can probably be looking at CEF's to buy at a discount as we reach the end of the hiking cycle, if you like and understand these funds. Now is not too early to begin looking.
You have to dig a little deeper into some of these leveraged CEFs to understand their financing terms for their leverage. Normally they borrow short term and buy long term. So when their short term loans mature and they have to borrow at short term rates today, they could end up in a situation where the borrowing costs exceed the coupon of the longer term debt.
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Old 11-24-2022, 10:27 AM   #1553
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Thank you for the insight. I started small at the beginning of the year and have built up the position as interest rates have risen so I have been averaging down the cost. So given the information above - It does make more sense to buy individual bonds at a lower yield and but lower the leverage risk. Have a Happy Thanksgiving.
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Old 11-24-2022, 11:27 AM   #1554
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What if the Fed starts talking back the rate increases, the level or the frequency, even a bit - like what came out today - and folks start to buy bond funds again. Maybe the opposite occurs and instead of tax loss deals, managers suck up all the good inventory. Nah or ya?
I've been thinking something similar.

We all need to be mindful of recency bias as it relates to interest rates. These big bonds funds are getting crushed by their duration. Duration of 7 and 3% rate hike = (21%) = ouch.

But when the fed reverses, which it will at some point, the durations will serve to refloat the value of bonds and therefore the value of the bond fund.

I sold my broad bond fund early this year and have built some ladders instead.

If we believe we are closer to the end of the rate cycle than the beginning there may be good reason to begin buying back into bond funds. In doing this, one would seeking capital appreciation on the bonds rather than distribution yield.
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Old 11-24-2022, 11:42 AM   #1555
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I've been thinking something similar.

We all need to be mindful of recency bias as it relates to interest rates. These big bonds funds are getting crushed by their duration. Duration of 7 and 3% rate hike = (21%) = ouch.

But when the fed reverses, which it will at some point, the durations will serve to refloat the value of bonds and therefore the value of the bond fund.

I sold my broad bond fund early this year and have built some ladders instead.

If we believe we are closer to the end of the rate cycle than the beginning there may be good reason to begin buying back into bond funds. In doing this, one would seeking capital appreciation on the bonds rather than distribution yield.
is that how the fund managers work? Do they watch the bonds and trade in their poor performers or lower yields for higher yields? If so, wouldn't they have been buying them all this time? I just kind of picturing them waiting for a specific time (bond maturity?) to trade in their bonds for others rather than watching the market. I am speculating here.. so i could be way off base as this is more of a question.
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Old 11-24-2022, 01:11 PM   #1556
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is that how the fund managers work? Do they watch the bonds and trade in their poor performers or lower yields for higher yields? If so, wouldn't they have been buying them all this time? I just kind of picturing them waiting for a specific time (bond maturity?) to trade in their bonds for others rather than watching the market. I am speculating here.. so i could be way off base as this is more of a question.
Passive bond funds take no such action. Look at BND. The distribution and average coupon have not budged all year. Passive bond funds do something even worse. Every month they sell the shorter duration (now at a loss) and buy longer durations to maintain an average duration. Bond funds need positive inflows to buy bonds. The only buyers are short sellers covering and taking profits. It's all about what a bond fund holds versus what you can buy today. Don't expect a bond fund with a 5 year duration and with an average coupon of 2.4% to outperform even a 5 year 5% non-callable CD.
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Old 11-24-2022, 03:24 PM   #1557
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is that how the fund managers work? Do they watch the bonds and trade in their poor performers or lower yields for higher yields? If so, wouldn't they have been buying them all this time? I just kind of picturing them waiting for a specific time (bond maturity?) to trade in their bonds for others rather than watching the market. I am speculating here.. so i could be way off base as this is more of a question.
A bond manager doesn't have to be active to see a duration linked change in price of a fund. A perfectly passive, buy-and-hold bond fund will see the prices move too.

Similar to when interest rates are rising, the upside price sensitivity of a portfolio is also linked to its duration. If they are marking their assets to market, the price of a bond will increase when rates begin to drop.

A long duration fund should be just as sensitive to price increases when rates are falling as it is to price decreases when rates are rising.

I don't think rate increases are done ... but those of us who sold our high duration bond funds will want to think about getting that duration back before interest rates begin to fall.
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Old 11-24-2022, 07:30 PM   #1558
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Hypothetical question. I would never buy a bond or treasury or C.D. that I did not intend to hold to maturity but having said that I have no idea what I might want money for 3 years down the road. Let's say I buy a $100000.00 5 year treasury that is paying 5%. Lets say something happens 3 years down the road that I need the money for. Let's say that interest rates have not changed since I bought the treasury. I want to know how big of a hit should expect if I sell it on the secondary market.
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Old 11-24-2022, 08:02 PM   #1559
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Hypothetical question. I would never buy a bond or treasury or C.D. that I did not intend to hold to maturity but having said that I have no idea what I might want money for 3 years down the road. Let's say I buy a $100000.00 5 year treasury that is paying 5%. Lets say something happens 3 years down the road that I need the money for. Let's say that interest rates have not changed since I bought the treasury. I want to know how big of a hit should expect if I sell it on the secondary market.
If rates stay the same (across the treasury yield curve) you can determine how much the bond would theoretically be worth by comparing it to a another bond with that shorter maturity.

For example, if you bought a 5 year T-Note @ 4.5%, and held it for three years, and rates stayed the same then that 5 year note should price about the same as a new 2-year note does (because the 5-year note would only have 2 years left). You can back into the expected price using a bond yield calculator and adjust the current price to match the now new issue 2-year notes yield. (Minus the hit you would take on the spread.)

Thus, assuming a normal yield curve and no change in rates (positive slope) you would make money (gain on the price).
Assuming a flat yield curve, no gain or loss
Assuming an inverted yield curve, e.g. you buy 10-year notes today which have a lower yield than 1-year bills, loss.

Of course, it is hard to predict any of this - not only where rates will be but the shape of the curve.

ETA: I thought I gave an example similar to this on this (or another) thread about a month ago. I can't look now but will look when I get a chance.
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Old 11-25-2022, 08:40 AM   #1560
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If rates stay the same (across the treasury yield curve) you can determine how much the bond would theoretically be worth by comparing it to a another bond with that shorter maturity.

For example, if you bought a 5 year T-Note @ 4.5%, and held it for three years, and rates stayed the same then that 5 year note should price about the same as a new 2-year note does (because the 5-year note would only have 2 years left). You can back into the expected price using a bond yield calculator and adjust the current price to match the now new issue 2-year notes yield. (Minus the hit you would take on the spread.)

Thus, assuming a normal yield curve and no change in rates (positive slope) you would make money (gain on the price).
Assuming a flat yield curve, no gain or loss
Assuming an inverted yield curve, e.g. you buy 10-year notes today which have a lower yield than 1-year bills, loss.

Of course, it is hard to predict any of this - not only where rates will be but the shape of the curve.

ETA: I thought I gave an example similar to this on this (or another) thread about a month ago. I can't look now but will look when I get a chance.
Thanks for the explanation. I guess there are a lot of variables other than interest rates..I'm just trying to decide if I should avoid 5 year durations or if it still might be to my advantage to buy some even if something unexpected should happen that would cause me to sell..
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