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

[NomDeER]

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Originally Posted by Freedom56 All Powell can open his mouth gain mid December when he raised another 50 basis points and kill this bond rebound as he did with the others.

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Originally Posted by Freedom56 It was a new issue from the end of October 2022. You will have to wait for the next leg up on rates for issues like that. In the mean time, the action will be in the secondary markets over the next three weeks. We just need Powell to add fuel to the fire.

Are people listening to Powell? Or just listening to the parts they like? Powell said last week that he can see moderating the rate of increases, but he also said that he expects to see the interest rates elevated for some time. Certainly no talk of a pivot. But, in response, rates dropped for CDs, treasuries, other bonds, etc. Maybe he just needs to say it more times or louder?

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Originally Posted by Popeye Whoa, more than half of the new issues disappeared from Fidelity. There’s only 7 of them there now. Is everyone seeing the same thing?

Vanguard has even fewer new issues available. There are slim pickings with other bonds and CDs.

[Montecfo]

Quote:

Originally Posted by NomDeER Are people listening to Powell? Or just listening to the parts they like? Powell said last week that he can see moderating the rate of increases, but he also said that he expects to see the interest rates elevated for some time. Certainly no talk of a pivot. But, in response, rates dropped for CDs, treasuries, other bonds, etc. Maybe he just needs to say it more times or louder?

The threat of higher ST rates is convincing the market that the Fed is serious about taming inflation. Accordingly, the markets see LOWER mid and long-term rates out into the future, either due to Fed induced low inflation, recession, or both. This is a well known and not unexpected effect.

So the bond market is taking his words to heart. The equity markets not so much, seem to have a very short memory or there is still just too much cash waiting to enter the market.

[daylatedollarshort]

Quote:

Originally Posted by NomDeER Are people listening to Powell? Or just listening to the parts they like? Powell said last week that he can see moderating the rate of increases, but he also said that he expects to see the interest rates elevated for some time. Certainly no talk of a pivot. But, in response, rates dropped for CDs, treasuries, other bonds, etc. Maybe he just needs to say it more times or louder?

You can go back to the beginning of the year, when real interest rates based on CPI / federal funds rates were -8% to -9%, and Fed members were talking abut inflation as their top priority and 6 - 7 rate increases, and see the financial markets initially grossly under-reacted. So much for the efficient market theory. That seems to have been a bunch of bunk.

So now we have -3.7% real interest rates, and 7.7% year over year inflation when The Fed's target is 2%. Historically real rates have to go to 0% to get high inflation under control. Are the markets under-reacting again? Time will tell.

[Freedom56]

Canadian banks are now offering GIC (Canadian equivalent of CDs) at 5% for 10 years.

These are non-cashable and interest can be paid out monthly, quarterly, semi-annually, or compounded annually and paid out at maturity.

https://www.bmo.com/main/personal/in...gic/gic-rates/

So Canadian banks (that are much more conservative than American banks) appear to believe long term rates are going higher. It's only a matter of time before short term rates rates pull long term rates much higher.

[Mulligan]

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Originally Posted by Freedom56 Canadian banks are now offering GIC (Canadian equivalent of CDs) at 5% for 10 years. These are non-cashable and interest can be paid out monthly, quarterly, semi-annually, or compounded annually and paid out at maturity. https://www.bmo.com/main/personal/in...gic/gic-rates/ So Canadian banks (that are much more conservative than American banks) appear to believe long term rates are going higher. It's only a matter of time before short term rates rates pull long term rates much higher.

Interestingly while offering the 5% GIC, the CAD 10 year in 6 weeks time has collapsed from 3.68% peak to 2.82%.

[Montecfo]

Quote:

Originally Posted by Freedom56 Canadian banks are now offering GIC (Canadian equivalent of CDs) at 5% for 10 years. These are non-cashable and interest can be paid out monthly, quarterly, semi-annually, or compounded annually and paid out at maturity. https://www.bmo.com/main/personal/in...gic/gic-rates/ So Canadian banks (that are much more conservative than American banks) appear to believe long term rates are going higher. It's only a matter of time before short term rates rates pull long term rates much higher.

Or until the economy slows so much the Fed has to cut, or inflation continues to slow such that 3% on the 10 year seems very reasonable.

Hard to say how it will play out.

[ER604me]

Saw the following offering on VG;
CUSIP 48128GV49
It is a JPMorgan note that matures in about 50 months. Low interest (1.05%) but the trace activity says it is available at 84.36. The YTW is 5.25% and is only callable after 33 months. This appears to work for my 4 year rung. Wondering what others think?

[Car-Guy]

Quote:

Originally Posted by NomDeER Are people listening to Powell? Or just listening to the parts they like? Powell said last week that he can see moderating the rate of increases, but he also said that he expects to see the interest rates elevated for some time. Certainly no talk of a pivot. But, in response, rates dropped for CDs, treasuries, other bonds, etc. Maybe he just needs to say it more times or louder?

I do, but I don't count. I don't trust much he has to say when he looks more than a week into the future.

[Echard]

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Originally Posted by Car-Guy I do, but I don't count. I don't trust much he has to say when he looks more than a week into the future.

Because inflation can be a self-fulfilling prophecy, any outward communication from the Fed will be more aggressive towards taming inflation. I agree with others that we still have a ways to go on getting inflation under control.

[Spock]

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Originally Posted by Echard Because inflation can be a self-fulfilling prophecy, any outward communication from the Fed will be more aggressive towards taming inflation. I agree with others that we still have a ways to go on getting inflation under control.

When listening to the Fed, keep in mind the following whoppers:

1. "the subprime mortgage problem is contained" - Ben Bernanke 2007
2. "the recent rise in inflation is transitory" - Jerome Powell June 2021

"Higher for longer" is the talk, until the talk changes and changes suddenly.

[COcheesehead]

Quote:

Originally Posted by ER604me Saw the following offering on VG; CUSIP 48128GV49 It is a JPMorgan note that matures in about 50 months. Low interest (1.05%) but the trace activity says it is available at 84.36. The YTW is 5.25% and is only callable after 33 months. This appears to work for my 4 year rung. Wondering what others think?

Fidelity shows no ask, so can you even buy it?
I am an income ladder guy, so the coupon wouldn’t work for me.

[Freedom56]

Quote:

Originally Posted by ER604me Saw the following offering on VG; CUSIP 48128GV49 It is a JPMorgan note that matures in about 50 months. Low interest (1.05%) but the trace activity says it is available at 84.36. The YTW is 5.25% and is only callable after 33 months. This appears to work for my 4 year rung. Wondering what others think?

People who are buying these low coupon notes are doing so for capital gains so it will be taxed at 0, 15, or 20% depending on your tax bracket. The coupon payments will be treated as ordinary income. So it can advantageous vs being taxed on ordinary income depending on your tax bracket. The call risk is zero. JP Morgan is as safe as it gets for a US money center bank. I personally would not buy these since I want cash flow to reinvest. The yield would have to be at a premium over high coupon bonds for it to make sense to me.

[Freedom56]

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Originally Posted by Spock When listening to the Fed, keep in mind the following whoppers: "the subprime mortgage problem is contained" - Ben Bernanke 2007 "the recent rise in inflation is transitory" - Jerome Powell June 2021 "Higher for longer" is the talk, until the talk changes and changes suddenly.

But Bernanke received a Nobel prize in economics for being totally clueless.

[lawman]

I don't ladder. What I do is decide how much dry powder I want to hold and then I buy the best deals I can find between 1 and 5 years..To me "best deal" means when the bond has matured which one will have made me the most money. I don't care when it comes as long as some are maturing each year so I guess maybe in a way I do ladder but not formally. I don't need the cash flow. I just want to make as much money as I can when all is said and done..Do I understand correctly that bonds with a lower coupon receive better tax treatment than those with a higher coupon assuming the YTM is the same?

[Car-Guy]

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Originally Posted by Freedom56 But Bernanke received a Nobel prize in economics for being totally clueless.

Seems to be a prerequisite for that job.

I'm sitting here watching the movie "Too Big to Fail" as I type this... We just can't seem to help ourselves.

[pb4uski]

Quote:

Originally Posted by Spock When listening to the Fed, keep in mind the following whoppers: "the subprime mortgage problem is contained" - Ben Bernanke 2007 "the recent rise in inflation is transitory" - Jerome Powell June 2021 "Higher for longer" is the talk, until the talk changes and changes suddenly.

You forgot one:. Hindsight is 20/20

[Freedom56]

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Originally Posted by lawman IDo I understand correctly that bonds with a lower coupon receive better tax treatment than those with a higher coupon assuming the YTM is the same?

It depends on the duration and your tax bracket. For durations over one year, the gain from a corporate bond purchased at a discount to par will be treated as a long term capital gain at maturity or call or if sold after one year for a gain. you need to compare your tax rate for ordinary income vs the 0,15, or 20% long term capital gains rates applicable to your tax bracket. The coupon payment is still treated as ordinary income.

[Spock]

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Originally Posted by pb4uski You forgot one:. Hindsight is 20/20

When head of the largest central bank on the planet, you're foresight oughta be better than what you wish things to be.

[Freedom56]

The view from David Solomon the CEO of Goldman Sachs (the company paying many of us 6.75%).

https://www.youtube.com/watch?v=vPP1rC3qBJI

[Freedom56]

Now the view from Jamie Dimon of JP Morgan. He also pays many of us but they are not as generous as Goldman Sachs and others. Pay attention to his views on longer term rates.

"JPMorgan CEO Jamie Dimon: Inflation is eroding consumer wealth and may cause recession"

https://www.youtube.com/watch?v=40Md3SQ6ZGs

"Crypto is a complete sideshow, tokens are like 'pet rocks,' says JPMorgan CEO Jamie Dimon"

https://www.youtube.com/watch?v=TIJbTsYbHME