Muni Bond (and Muni Bond Fund) Discussion

[Mr._Graybeard]

The odd "next" call date is that it's continuously callable after the initial call date - meaning they can call at any time they like with 30 days notice. If you check on it tomorrow, the "next" call date field will show 3/13/2022 and it will keep moving forward a day as each day passes, unless they really do call them. Considering that they've not called since Oct 2017 when they were first able to, suggests they aren't going to call - especially when they have other muni issues at 6% coupon and higher...2.9% is extremely cheap for them.

Thanks -- the call date had me puzzled. The bond did indeed look sketchy, but it is a state university, so I might have gambled on it for one year.

 

[njhowie]

10-year at 1.998% at this moment.

...and it pulls back again.

10:48AM = 2.003%

busted through - now on a tear...2.015%

11:33AM = 2.026%
12:53PM = 2.045%

 

[disneysteve]

I'm a newbie at this so I'm still working to educate myself on all of the terms and conditions and abbreviations. Is there a good source you recommend? I'm seeing terms like OID, Material Events, Sinking Fund, Extraordinary Calls, etc. Where is a good place to learn what all of that means?

 

[COcheesehead]

I'm a newbie at this so I'm still working to educate myself on all of the terms and conditions and abbreviations. Is there a good source you recommend? I'm seeing terms like OID, Material Events, Sinking Fund, Extraordinary Calls, etc. Where is a good place to learn what all of that means?

Good start here.

https://www.fidelity.com/learning-c...fixed-income-bonds/fixed-income-learning-path

 

[Out-to-Lunch]

Investopedia is also a good place for some of these terms.

 

[pb4uski]

724791bh0

That looks interesting. Looks to me like a 2.89% YTC and 3.69% YTM assuming a purchase on 2/1/22 at 100.50 and negligible credit risk because it is insured. Am I looking at it right?

Any idea why the screenshot indicates the last trade yield is 2.688%?

 

[njhowie]

That looks interesting. Looks to me like a 2.89% YTC and 3.69% YTM assuming a purchase on 2/1/22 at 100.50 and negligible credit risk because it is insured. Am I looking at it right?

Purchase date was 2/7 and settlement date 2/9. Fidelity's price yield calculator shows 2.477% YTC and 3.617% YTM. The purchase was at 100.5, but if you are calculating the yields you need to make the total price 100.6 to account for the 0.1 markup.

Any idea why the screenshot indicates the last trade yield is 2.688%?

Yes - because it did not include the 0.1 markup. If you look at EMMA, it correctly shows the yield with the markup:
https://emma.msrb.org/Security/Details/?id=724791BH0

 

[njhowie]

Texas toll bridge muni I hold, defeased and notice of call 2 years in advance:
https://emma.msrb.org/P11565282-P11208442-P11628095.pdf

 

[Mr._Graybeard]

I bought an Illinois GO bond, yesterday, 4% coupon, call date 2026, YTW 2.78%.

 

[jazz4cash]

I’m sure I’ve asked before, but I’m circling back. What resources do you suggest to find bonds? I’m using the Fido search tool mostly but I think there are probably better places to search.

 

[njhowie]

I bought an Illinois GO bond, yesterday, 4% coupon, call date 2026, YTW 2.78%.

This morning I picked up an Illinois park district zero GO, insured, call protected, sinking fund protected, escrowed issue 2030 maturity for 3.27%...slowly the yields are coming back up.

 

[jazz4cash]

Fidelity posted the market-linked CDs for this month and there is a nice variety this time. There are 6 being offered, whereas it's been down in the 1 or 2 range lately. Here is the link to them:

https://fixedincome.fidelity.com/ftgw/fi/FICorpNotesDisplay?name=PPN&requestpage=FISearchAcrossOff

Like regular CDs, you can buy them in any multiple (of $1000) you like. For any you might consider, you should review the prospectus. Like muni bond prospectuses, they are lengthy, but after reading a couple, you get the feel for what you need to focus on in each. The key point is to understand the composition of the index they are using. Additionally, I think the historical/backtested returns are also important to give an idea of how the index performed through a known period of market performance.

Personally, out of the ones offered this month, I'm buying a few of the two 7 year issues with 200% participation rate (JPM and GS).

Other folks (on ER and other sites) I originally asked for feedback on these a couple years ago immediately gave up when they saw a prospectus with 70+ pages saying it was too complicated for them and wanted nothing to do with them. Others complained about the cut the issuer was getting. My view - it's guaranteed not to lose any principal. Whatever algorithms they're using, if it has a reasonable chance of performing well, then that's good enough for me for the downside protection. In the current environment, where both bonds and CDs are providing no return, the market-linked CDs give the potential for respectable returns with guarantee of no loss (assuming held to maturity).

Anyhow, it falls in to the alternatives category...I just won't post about them on the new/old alternatives thread, as I don't really want to get into a debate with some of the folks who look to pick fights. As I mentioned, for those I have purchased over the past 2 years, they have all performed exceptionally relative to my expectations...to the point where I wish I had purchased more.

I bought the JP Morgan Chase issue 4812U7L7 8/31/21 which is currently down 9.47%. Should I be concerned? I expected it might drop from par, but not this much.

 

[njhowie]

I bought the JP Morgan Chase issue 4812U7L7 8/31/21 which is currently down 9.47%. Should I be concerned? I expected it might drop from par, but not this much.

Nothing to worry about because when it matures you will get nothing less than 100 cents on the dollar. All of mine purchased over the past 6 months are down - a good number between 10% and 15%.

Yesterday Fidelity posted the set being offered for this month, and I'm buying more of the Goldman ones I've been purchasing - now offering 350% participation rate.

My approach has always been that the issuing banks could throw whatever algorithms they wanted at it. Maybe it pays off wildly, maybe it does nothing, maybe it goes down wildly - I get the risk exposure without taking on any of the downside risk.

 

[njhowie]

BlackRock Says Muni-Bond Pain Sets Up Long-Term Gains

https://finance.yahoo.com/news/blackrock-says-muni-bond-pain-155255984.html

Like us, they are beginning to see some value.

 

[njhowie]

10-year dipping a good amount today.

 

[njhowie]

I purchased these right before the close today.

Insured, Fed/CA tax free

9/1/2027 YTM=3.35%
9/1/2024 YTC=1.65%

https://emma.msrb.org/Security/Details/?id=75212CAP4

If interested, Fidelity had 5 more of them at the close.

 

[njhowie]

I bought the JP Morgan Chase issue 4812U7L7 8/31/21 which is currently down 9.47%. Should I be concerned? I expected it might drop from par, but not this much.

jazz - check out the info at this link:
https://go.maplemarkbank.com/market-linked-cd


It's a Texas bank offering their own market-linked CDs. Their flavor, gives you a maximum upside of 2% annually - peanuts. However, the fundamentals of it are the same as the ones we've been buying through Fidelity. Look at the picture and discussion in the How It Works section. No different than your JPM. The difference is that the JPM CD is sitting in your brokerage account and gets priced daily, so you see it, and it weighs on you. If it were in the bank account, you'd likely see it priced at the face value the entire time, they'd simply pay you the additional interest at year end or not, and then at maturity return the principal.

 

[jazz4cash]

Thanks, Howie. That’s helpful but if 2% is peanuts, I’m raising my expectations.

 

[njhowie]

Quick question for the muni crowd...

How is your portfolio holding up?

My 1.5/98.5 (up from 1/99, nibbling during downturn) is down less than 1% from it's December 31 high, easily outperforming most all indexes. I'm extremely happy with how my munis are holding up.

I get a good laugh out of all the folks who were "BINO" (Bonds In Name Only), preaching about how their bonds are a ballast, and all of a sudden, they see them down as much as 5% and are flipping out looking to get entirely out of them all...talk about not timing the market. Not just here, over at Bogleheads as well. LOL!

 

[jazz4cash]

I just keep thinking “why didn’t I figure out how to buy more” when the deals were available. It’s tax time and looking at the tax free income line on my 1040 makes me smile. My individual issues are up 4-8%, down from 10-12%. Single state muni fund is down 3%. Total portfolio is down maybe 5%….I really only track quarterly. I’m still over-allocated to CDs paying 3-3.7%.

 

[jazz4cash]

How Long Are You Willing to Go?

I was starting to see some signs of rates ticking up but now the geopolitical tensions have cast a lot of uncertainty onto the markets.

I'd like to hear opinions on what maturities you are comfortable with. My 1st purchase was a 22 yr bond which now has 17 yrs to go. I'm not too interested in going beyond 25 yrs but I guess I would go out to 30 if the value was right. I am mostly trying to fill a bond ladder with uneven steps.....buying wherever I find value.

 

[njhowie]

I'm "younger" than most of you folks, so I have a bit more appetite for volatility and the longer-term maturities. Given the right yield, I am comfortable with any maturity. However, the past few weeks, as I've had money to roll in to new bonds, I have been sticking to maturities no further out than 2030.

 

[njhowie]

Just picked up an insured Fed/TX tax free zero:

8/15/2042 YTM=6.062%
8/15/2024 YTC=2.527%

https://emma.msrb.org/Security/Details/?id=3464242G8

 

[jazz4cash]

Interesting…what do you expect to happen with that bond? I’m thinking you don’t plan to hold it for 20 yrs since its a zero. Considering my earlier qustion about maturities, i probably wouldn’t go much beyond 5 yrs on a zero.

 

[njhowie]

Interesting…what do you expect to happen with that bond? I’m thinking you don’t plan to hold it for 20 yrs since its a zero. Considering my earlier qustion about maturities, i probably wouldn’t go much beyond 5 yrs on a zero.

Actually, I hold a lot of similar zeroes from this issuer with maturities from 2039 to 2053 and call dates the next couple years on 8/15/22, 8/15/23, and 8/15/24. My plan is to hold them to maturity, assuming they go the distance because the YTM on all of them are 5% to 7% and they are insured. If they do call, then I'm going to have a lot of funds coming back to me for reinvestment. When I began acquiring them, my assumption was that they'd all be called when they could be because interest rates were so low and the YTC on all of them is in the 1% to 2.75% range - so it was a good yield for the short-term.

As I mentioned in the reply to your previous question - if the yield is right, I can be happy with any maturity. Long term 5% to 7% insured tax free easily makes the cut.