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

[Born2Fish]

Yes and it represents about a .75 spread to Goldman Sachs other notes on the secondary market.

What is the significance of the GS .75% spread?

Is the 0.75% spread due to the expected Fed rate increase in November?

 

[Freedom56]

I am buying in my TDA IRA. I am seeing more of Goldman Sachs (GS) corporate notes (bonds) at higher rates (so far) vs. other banks.

I am interested in the 7.0% GS Note above, but already have 2.5 % of my total portfolio in GS bonds.

GS rating is A2/BBB+.

Toronto Dominion bank (Canada) is rated A1/A.

What limit do you have for max % of portfolio allocated to a single bank?

Would the difference in credit rating between GS and TD banks influence your percent allocation?

TD bank is one of the safest in North America and among the top 50 in the world. It is much safer than Goldman Sachs. I currently own Royal Bank of Canada, TD Bank, CIBC, Scotia Bank, Bank of Montreal, Citigroup, JP Morgan, Goldman Sachs, Wells Fargo, and Bank of America. All those banks now represent about 30% of my holdings. Large banks have always dominated my portfolio concentration as I avoid many sectors because of their overall instability and secular decline and defaults (i.e. big box retailers, malls, mining, industrials). If you have a position in GS, I would diversify to TD Bank.

 

[David3]

Just saw a Goldman Sachs 10-year bond at Fidelity at 7.0%

CUSIP - 38150APU3

Issues on 10/27

Doesn't seem like a great deal to me. For an extra 0.25% per year, versus their 5 year offer, you are effectively selling them an option to keep you locked in at 7% for years 6-10 if rates go higher.
The 5 year is a much better offer in my view. 5 years from now, if rates have dropped, both issues will likely have been called. If rates are higher, the 5 year will mature - freeing up your capital to buy a higher yield instrument.

 

[Freedom56]

What is the significance of the GS .75% spread?

Is the 0.75% spread due to the expected Fed rate increase in November?

The yield for these new issues are based on secondary markets from the previous week when rates were hitting new highs. Also a lot of these new issues with 10 year 5.5% coupons are not finding too many buyers. Yields have pulled back this week . I normally look at the secondary market before buying any new issue. If yields are higher on the secondary market, I pass on the new issue.

 

[Freedom56]

Doesn't seem like a great deal to me. For an extra 0.25% per year, versus their 5 year offer, you are effectively selling them an option to keep you locked in at 7% for years 6-10 if rates go higher.
The 5 year is a much better offer in my view. 5 years from now, if rates have dropped, both issues will likely have been called. If rates are higher, the 5 year will mature - freeing up your capital to buy a higher yield instrument.

It's not better. I would not go beyond 5 years at this point. As I stated in an earlier post, I would want to see about 8.5% on a 10 year high grade note before I would consider going beyond 5 years.

 

[Freedom56]

New 5 year note listed at TDA at 6.35%

***Bank Of America Corp. Callable Fixed Rate Notes

CUSIP:

06048WZ86
Final Prospectus
Bond Details

Offering Period

10/21/2022 - 10/26/2022

Maturity Range

2027-2027


Tax Status

Taxable

Ratings

A2/A-


Callable



Maturity

10/28/2027

Coupon & Yield

Coupon

6.350

Pay Months

N/A

Current Yield

N/A


Frequency

Semi-Annually

First Coupon

04/28/2023

Yield to Maturity

6.350


Yield to Worst

N/A
Offer & Pricing Information

Quantity


Price

100.000

Principal

$1,000.00


Min. Qty


Settlement Date

10/28/2022

Accrued Interest

$0.00

 

[Sunset]

Just saw a Goldman Sachs 10-year bond at ..... 7.0% CUSIP - 38150APU3

Thanks, I just pickup up some to have something going long in the bond "ladder" which is really missing a bunch of rungs

 

[Sunset]

I'm wondering how much of a spread does it take for a company, example: GS bond at 7% to be called ?
The other factor is I'm not even sure what they would compare to even consider calling the bond ?

 

[Freedom56]

Remember the rule of 72 in fixed income investing. At 6.75% it will take 72/6.75 or 10.67 years to double your money. This assumes you re-invest the money at the same and higher yields and your capital is returned. It works well in tax sheltered accounts where your money continues to grow without tax liability until you withdraw.

 

[Freedom56]

I'm wondering how much of a spread does it take for a company, example: GS bond at 7% to be called ?
The other factor is I'm not even sure what they would compare to even consider calling the bond ?

If the past is any indication, I have had 5.5% CDs called when CD rates dropped to 3.6%. The CDs had 3 years remaining. So it depends on the duration and coupon. It also depends on how much is outstanding. These are note issues and in cases where the outstanding amount is small, banks often do not bother to call the notes as the administrative expenses are higher than the extra interest payments.

 

[Sunset]

Remember the rule of 72 in fixed income investing. At 6.75% it will take 72/6.75 or 10.67 years to double your money. This assumes you re-invest the money at the same and higher yields and your capital is returned. It works well in tax sheltered accounts where your money continues to grow without tax liability until you withdraw.

I'm trying to make most bond purchases in IRA/Roth accounts.
Did do a goof and purchase a 5 year TIP in the regular account, so will have more fun doing taxes for the next 5 years.

I'm sure I do small potatoes compared to most folks, as the largest single purchase of interest bearing things has been $20K in a Treasury.

 

[Letj]

Love this thread and learning so much. I appreciate Freedom and all the other helpful posters on this thread. Just bought the 3 year Goldman Sachs and 5 year Bank of America.

 

[JoeWras]

I'm trying to make most bond purchases in IRA/Roth accounts.
Did do a goof and purchase a 5 year TIP in the regular account, so will have more fun doing taxes for the next 5 years.

I'm sure I do small potatoes compared to most folks, as the largest single purchase of interest bearing things has been $20K in a Treasury.

Don't panic. It's just a 1099-OID and not a big deal. Just plug into your favorite tax program. It is as easy as handling 1099-INT. You just have to remember you have another form, that's all.

 

[NW-Bound]

Preparing the tax return is easy. Writing the check is hard.

 

[Freedom56]

Love this thread and learning so much. I appreciate Freedom and all the other helpful posters on this thread. Just bought the 3 year Goldman Sachs and 5 year Bank of America.

I'm buying the GS 5 year and the BOA 5 year notes and also the TD 5 year notes. For some reason investment advisors will have you believe that buying GS and BOA stock is okay but buying their bonds is risky. In reality the opposite is true. Bond interest payments and return of capital at maturity or call are contractual obligations. Companies have no obligation to pay dividends and there is no par value for stocks.

 

[soylentgreen]

First post here. Appreciating all the sage advise here, esp Freedom, thank you.

This bond says the note will price on Oct 26, is there a reason to wait until then to buy then or is Oct 25 viable for the 6.35% at 100%?

New 5 year note listed at TDA at 6.35%

***Bank Of America Corp. Callable Fixed Rate Notes

CUSIP:

06048WZ86
Final Prospectus
Bond Details

Offering Period

10/21/2022 - 10/26/2022

Maturity Range

2027-2027


Tax Status

Taxable

Ratings

A2/A-


Callable



Maturity

10/28/2027

Coupon & Yield

Coupon

6.350

Pay Months

N/A

Current Yield

N/A


Frequency

Semi-Annually

First Coupon

04/28/2023

Yield to Maturity

6.350


Yield to Worst

N/A
Offer & Pricing Information

Quantity


Price

100.000

Principal

$1,000.00


Min. Qty


Settlement Date

10/28/2022

Accrued Interest

$0.00

 

[Montecfo]

What about Floaters?

1 Bk Of America Corp
Moody's Outlook Stable | Conditional Call | Financials | Subordinated | BAC | Floating: 3M LIBOR + 65BP | Quarterly Reset | Quarterly Pay FLT 12/01/2026 94.468
92 6.566
Baa1

4 year subordinated debt resets quarterly, LIBOR+65BP

 

[Freedom56]

First post here. Appreciating all the sage advise here, esp Freedom, thank you.

This bond says the note will price on Oct 26, is there a reason to wait until then to buy then or is Oct 25 viable for the 6.35% at 100%?

it's priced and good to go. Tomorrow is the deadline.

 

[Freedom56]

1 Bk Of America Corp
Moody's Outlook Stable | Conditional Call | Financials | Subordinated | BAC | Floating: 3M LIBOR + 65BP | Quarterly Reset | Quarterly Pay FLT 12/01/2026 94.468
92 6.566
Baa1

4 year subordinated debt resets quarterly, LIBOR+65BP

The 3 month LIBOR will drop off as rates stabilize and will drop first when the Fed cut rates. You have to believe that the Fed will continue to raise rates beyond the 4.8% target to buy this floater.

 

[Letj]

I'm buying the GS 5 year and the BOA 5 year notes and also the TD 5 year notes. For some reason investment advisors will have you believe that buying GS and BOA stock is okay but buying their bonds is risky. In reality the opposite is true. Bond interest payments and return of capital at maturity or call are contractual obligations. Companies have no obligation to pay dividends and there is no par value for stocks.

How do I find the TD bank 5 year note? A search of FINRA came up with nothing.

 

[lordjust]

How do I find the TD bank 5 year note? A search of FINRA came up with nothing.

This it ?

89114X3W1

 

[Freedom56]

How do I find the TD bank 5 year note? A search of FINRA came up with nothing.

It is at TDA not Fidelity. In fact, TDA as usual, has far more selection of new issues including several from from JP Morgan,

The Toronto-Dominion Bank (“TD” or “we”) is offering the Callable Fixed Rate Notes due October 31, 2027 (the “Notes”) described below.
CUSIP / ISIN: 89114X4J9 / US89114X4J92
The Notes will accrue interest at a fixed rate of 6.25% per annum from and including the Issue Date to but excluding the Maturity Date.
TD will pay interest on the Notes on the last calendar day of each January, April, July and October (each, an “Interest Payment Date”),
commencing on January 31, 2023 and ending on the Maturity Date or Optional Call Date (if applicable).
TD may, at its option, elect to redeem the Notes in whole, but not in part, on the last calendar day of each January, April, July and October (each,
an “Optional Call Date”), upon five Business Days’ prior written notice, commencing on October 31, 2023 and ending on the Interest Payment
Date immediately preceding the Maturity Date.

 

[Letj]

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

It is at TDA not Fidelity. In fact, TDA as usual, has far more selection of new issues including several from from JP Morgan,



The Toronto-Dominion Bank (“TD” or “we”) is offering the Callable Fixed Rate Notes due October 31, 2027 (the “Notes”) described below.

CUSIP / ISIN: 89114X4J9 / US89114X4J92

The Notes will accrue interest at a fixed rate of 6.25% per annum from and including the Issue Date to but excluding the Maturity Date.

TD will pay interest on the Notes on the last calendar day of each January, April, July and October (each, an “Interest Payment Date”),

commencing on January 31, 2023 and ending on the Maturity Date or Optional Call Date (if applicable).

TD may, at its option, elect to redeem the Notes in whole, but not in part, on the last calendar day of each January, April, July and October (each,

an “Optional Call Date”), upon five Business Days’ prior written notice, commencing on October 31, 2023 and ending on the Interest Payment

Date immediately preceding the Maturity Date.

This is very helpful. Explains why I couldn’t find it on Fidelity’s website. I hate to have to open another account but Fidelity told me I have to go through their bond trading desk if they don’t have it on their website and it would have to be a large enough buy to justify the purchase.

 

[Freedom56]

All corporate notes with coupons 6% and higher have been sold out at TDA as bond yields have pulled back and the spreads have narrowed. I think we can count on Powell to say something next week to spook the markets again so we can get those 6%+ yields again. Hopefully my orders for GS and BOA will execute tomorrow. The Wells Fargo 6% 3 year note is pending execution. The secondary markets are littered with a lot of low coupon notes from banks and other companies. High grade notes from technology companies (A rated) are trading with very narrow spreads to treasuries and not worth buying at this point. It appears that fixed income investors are crowding into the stronger sectors in fixed income and bidding those securities up. In any case, I have no plans to buy any more new issues until I see a "6" or higher as the leading digit. I'm pretty confident that we will see better yields this tax loss selling season.

 

[finnski1]

All corporate notes with coupons 6% and higher have been sold out at TDA as bond yields have pulled back and the spreads have narrowed. I think we can count on Powell to say something next week to spook the markets again so we can get those 6%+ yields again. Hopefully my orders for GS and BOA will execute tomorrow. The Wells Fargo 6% 3 year note is pending execution. The secondary markets are littered with a lot of low coupon notes from banks and other companies. High grade notes from technology companies (A rated) are trading with very narrow spreads to treasuries and not worth buying at this point. It appears that fixed income investors are crowding into the stronger sectors in fixed income and bidding those securities up. In any case, I have no plans to buy any more new issues until I see a "6" or higher as the leading digit. I'm pretty confident that we will see better yields this tax loss selling season.

Thanks for the update. Appreciate it. I have been following the yields closely myself. the 10 yr has pulled back from 4.3% just last Friday to around 4.02 today.