jazz4cash
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The last bond I purchased is showing a "last price" of 117.xx on my Fidelity account summary page. How realistic it that? I paid 109.xx a week or so ago.
The last bond I purchased is showing a "last price" of 117.xx on my Fidelity account summary page. How realistic it that? I paid 109.xx a week or so ago.
As previously mentioned, the last price shown in your portfolio list for a bond/CD/treasury is going to be the third party price - not the price of the last buy or sell (which you could easily verify). The portfolio summary is a single list of all of your stocks, bonds, and other products, so there is only going to be one column header for all of them.
As a muni bond investor, understanding how the market works, and generally being a buy and hold to maturity investor, you really should not care what the third party price is. The day you purchased the bond, you locked in the interest and yield to maturity. When the maturity date comes, you're going to collect 100.0, no matter what happens between now and then.
As far as how realistic it is, this morning, go in and select the bond and click to sell it. Since there likely aren't currently any offers of more of them for sale, it will prompt you to Request a Bid. Follow it through - it will post the bonds to the platform for dealers to bid on. It takes an hour for the process to complete and then you'll get an alert with the best price offered, where you can then decide if you want to sell them or not. This will give you the realistic price you could sell for. You could probably expect the bid to come back lower than what you paid. With your bonds, since they are extremely illiquid, it's possible that you do not get any bids back. However, you never know, one might come back close to the 117 price (or even higher) and you could sell for a quick profit. Any dealer offering you a bid is simply making a decision if he can quickly turn around and sell it at a higher price to someone else.
When the muni market gets tight with bonds selling above the third party price, I regularly request bids on lots of my bonds. I have sold when the price offered was a fair amount above the third party price and where I know they are overvalued. In a few circumstances, just a few weeks later I've repurchased the same bonds at a lower more realistic price. Yes, timing the market - doesn't bother me. However, it's not a matter of some gut feel or a routine of jumping in and out. It's simply mathematical logic. When I get the bid back from Fidelity, I simply go plug it in to their price-yield calculator, the same as I do when first purchasing, to determine yield to maturity and yield to call after commissions. If at any point the yield to maturity or yield to call fall below what I am looking for in my bonds, I will readily sell - as it means that the yield is no longer sufficient for the risk. I regularly did this when CD rates were up - if I got bids that would make the yield on the bond close to or less than the yield on a comparable CD, I'd sell the bond and be thankful - I locked in a profit and could then switch in to a comparable CD which has absolutely no risk.
Bottom line - the same as with anything you own - whether it's stock in your Fidelity account, your house, your car, or anything else - the "last price" should only be of interest/concern if you are looking to sell.
The part in bold is confusing to me. The yield to call/maturity that you are calculating based on the offer from dealers responding through Fido does not seem relevant. Your yield to call/maturity is based on the price you paid not the 3rd party offer price. I could see/anticipate some consideration of locking in a profit if the calculated yield by selling falls between the yield to call and yield to maturity if I anticipate likelihood of a call. That is something for me to research and prepare for.
Yeah, I get it. I never even considered the absolute limited upside of holding to maturity. It is a known known. OTOH the potential judgement call on if an issue is likely to be called is still an area for me to study. My gut is that the inertia to redeem at maturity is a tall order to overcome, but we are in unusual times.
Here's an interesting one I have that just passed the call date on 5/1:
https://emma.msrb.org/Security/Details/A4AC4E8E3B32BF503536E0089580FC279
I own 5 of the bonds. That last trade shown on 8/15/19 was when I bought. The interesting part of it - look at the blue box on the left showing the Coupon and Maturity Date, look a couple lines down and notice the Principal Amount at Issuance - $25,000!
Here is the entire bond issue:
https://emma.msrb.org/IssueView/Details/0A896BDFEC7860217E60F4FEEC3785D2
So, they've previously pre-refunded and redeemed everything except a total of $75,000 across the four maturities. I have no idea why they would do something like that...they refunded/called about $35 million worth, why leave $75,000 hanging? They can obviously afford to just pay it off - they're AA rated. So like I mentioned on the prior reply - this was one I purchased within sight of the call date (which would have YTC of 2.4% for 8.5 months), but now I'm getting 6.65% gravy going forward until they do call, or until it matures in 2040.
I was well aware of the situation when I purchased, so this isn't a surprise or anything, I just found it very interesting.
The trade activity is not coming up right now for some reason. I see a Build America Bond notation....is that an insured bond?
Anticipating a call is not something which can really be mastered. I've seen issuers who were relatively weak call an issue, and then I've seen strong ones not call when they had an obvious benefit to doing so. Many times I will purchase a bond that is within 3 to 6 months of the call date, offering a relatively low yield to call - maybe in the same ballpark that the equivalent CD is available for. Generally they will trade near 100.0 as folks simply expect they will be called. However, should they not call, the big upside is that you can have a nice 6% or 7% bond going forward until they do call.
I purchased a 6.2% AAA 2039 NYC muni for my mother a while back at 100.6 with only 3 months until the call date. Clearly, trading at 100.6 the expectation was that they'd be called. That was April last year when I purchased. So, unexpectedly, they didn't call and now we still have that AAA 6.2% bond. They can call whenever they like, or not at all - 6.2% is ridiculous at this time for as long as it lasts.
https://emma.msrb.org/Security/Details/?id=64971MZH8
The unrated bonds were sold to qualified institutional buyers only and priced to yield 7% (with maturity) in 2038.
Luxury Dorm Financed with Muni Bonds Falls Into Bankruptcy - less than 16 months after issuance:
https://www.bloomberg.com/news/arti...inanced-with-muni-bonds-falls-into-bankruptcy
It's the same situation as the University of Oklahoma housing project previously mentioned.
This is an example of a non-muni use of muni bonds. Note that these bonds were unrated.
Did I see you or maybe Brewer mention using tax free munis in IRAs if the yields were high enough? Don’t think I’ll be doing that.
3. Don't even look at the details of my purchase on 3/23 - just look at that summary tab and the price on 3/10 right before and 4/1 right after...and the price just last week, where the buyer is only getting 0.75%. Seeing that, I'm going to request a bid on it right now and see what comes back. If I can get 114 for it, I'll sell.
Here's another issue I purchased close to the call. This was a unique one. I purchased in November, about five weeks prior to the January 1 call date. That passed and they provided notice of the call maybe early/mid-February that it would happen mid-March. And then...they canceled the call! First time I've seen that. So, at the time of purchase, assuming the Jan 1 call, my effective yield was about 2.15% for five weeks, which was decent yield relative to comparable one month CDs. Since Jan 1, I'm getting 5.7%.
After they canceled the call, of course I was curious as to what happened. I contacted the issuer (a water utility system). They referred me to their investment advisor/underwriter, who said it was simply a matter of market conditions, and that it was not good timing for issuing the bonds being used to refinance. They would still do it, but just at a later date. Fine by me, give me the higher yield in the interim. My guess is that with interest rates continuing to decline, they can probably now issue the refinancing bonds at even lower yield than planned.
Now, clearly other folks who didn't contact the issuer or investment advisor jumped to conclusions, assuming something bad was in the works, and sold their bonds - below par. So, I was able to pick up another one of the maturities with 6.125% coupon for 99.75 (which the seller unloaded at 97.3).
https://emma.msrb.org/Security/Details/?id=840120AD1
https://emma.msrb.org/Security/Details/?id=840120AF6
https://emma.msrb.org/ER1319789-ES1061764-ER1435213.pdf
I have steered clear of IL issues until I get more comfortable with analyzing the specific issue. I see this one says it is GO in one place and Revenue in another.
(in thousands)
Cash and cash equivalents $92,381 Restricted cash $28,383 Investments $2,181,574 Total assets $2,855,286
Bonds payable $321,218 Total liabilities $478,701
Yesterday, for example, I purchased some bonds of Wellesley College in CT. Folks are running around pulling their hair out at this time staying away from university bonds because of the virus, and then CT to top it off - njhowie must be nuts!