Muni Bond (and Muni Bond Fund) Discussion

I have no particular affinity for HSBC, or any bank. If we're talking about FDIC insured CDs, in my view they are all equivalent aside from if they pay monthly, quarterly, or semi-annually, if they are callable or non-callable, and if they are step vs. fixed rate.

I did buy some of the HSBC 12/2027s early this morning before the remainder was taken by someone else. Just nibbling.

I have two called munis being redeemed two weeks from today. Will have to see what's available to flip into at that time.

After a disappearance for about a year, Fidelity has begun offering market-linked CDs once again as of a couple months ago. Depending on the terms being offered, I generally pick one of these up each month when they are offered for some diversification (since my AA is 0/99%). Lots of folks are very negative on these. However, I've been extremely happy with them. They are all performing better than I had hoped - about 5%-6% annually thus far.
 
njhowie said:
I have no particular affinity for HSBC, or any bank. If we're talking about FDIC insured CDs, in my view they are all equivalent aside from if they pay monthly, quarterly, or semi-annually, if they are callable or non-callable, and if they are step vs. fixed rate.

I did buy some of the HSBC 12/2027s early this morning before the remainder was taken by someone else. Just nibbling.

I have two called munis being redeemed two weeks from today. Will have to see what's available to flip into at that time.

After a disappearance for about a year, Fidelity has begun offering market-linked CDs once again as of a couple months ago. Depending on the terms being offered, I generally pick one of these up each month when they are offered for some diversification (since my AA is 0/99%). Lots of folks are very negative on these. However, I've been extremely happy with them. They are all performing better than I had hoped - about 5%-6% annually thus far.
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Very true re banks and FDIC. They're interchangeable. I'll check out those Fidelity CDs.
 
Here's a little recent stuff on HSBC and their China relationship:

https://wolfstreet.com/2021/07/04/hsbc-in-big-trouble-in-its-biggest-market-china/

HSBC, headquartered in the UK, is first and foremost an Asian bank. The Hongkong and Shanghai Banking Corporation Limited cut its teeth in the 19th century in Greater China. In 2020, its Mainland and Hong Kong operations accounted for 39% of its annual $50 billion in revenue, while the United Kingdom, its second largest market, brought in 28%. The bank is now selling off its retail banking units in France and the United States and scaling back its presence in some emerging markets in order to accelerate its eastward pivot.

But there’s a problem with this plan: Its success rests largely on the bank’s ability to maintain good relations with the Chinese government. And that is proving to be a tough proposition.

Relations have soured significantly over the past two years after it was revealed in 2019 that HSBC had ratted out Chinese telecom giant Huawei to the U.S. Department of Justice for breaching U.S. sanctions on Iran. The information provided by HSBC led to the arrest of Meng Wanzhou, Huawei’s chief financial officer and daughter of the company’s founder, in Vancouver in 2018.
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Anybody finding anything interesting or purchased something recently? Primarily out of boredom I purchased a muni last week.

Orlando International Airport (CUSIP 392274B47) - October 2023 maturity YTM=3.76%. Callable October 1 - if they do call, it's a negative 1.195% (APY) for the 9 week hold, which will come to a loss of $10.45. I was willing to risk $10 for the chance to make the 3.76% for two years. Coupon is 4.233%, so I'd guess 50-50 probability they do call. At least it's only 9 weeks to the call date, so will know fairly quickly.
 
I bought a $10K bond from the Flagg-Rochelle Ill Community Park District earlier this month -- CUSIP 338366BR7. Coupon is 3.125%, matures 1/1/39, callable after 1/1/27. That's stretching it a bit for me on the term, but with a coupon over 3% I figure it's likely to be called ASAP. YTC is about 2%.

Meanwhile, another $30K of my bond portfolio was redeemed on 7/15. I'm losing ground!
 
Mr._Graybeard said:
I bought a $10K bond from the Flagg-Rochelle Ill Community Park District earlier this month -- CUSIP 338366BR7. Coupon is 3.125%, matures 1/1/39, callable after 1/1/27. That's stretching it a bit for me on the term, but with a coupon over 3% I figure it's likely to be called ASAP. YTC is about 2%.
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I've fared well with a number of IL Community Park District bonds I've owned the past few years. I think you're good with that one - there's enough time to the call that interest rates can move higher and they don't call.
 
If rates move higher I'd like it to be called. Actually the bonds I've bought seldom make it past the call date. I've never traded in a rising-rate market, of course.

I don't fear bonds from Illinois. The only ones I've shied away from are Chicago GO. I like O'Hare debt, and thought about sewer revenue bonds but never took the plunge, so to speak.
 
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Mr._Graybeard said:
If rates move higher I'd like it to be called. Actually the bonds I've bought seldom make it past the call date. I've never traded in a rising-rate market, of course.
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Well of course - but that's exactly the point where the issuer will not call, if the coupon is below their rate to refinance. I try to purchase where I would not be unhappy if they call or are not called.

I don't fear bonds from Illinois. The only ones I've shied away from are Chicago GO. I like O'Hare debt, and thought about sewer revenue bonds but never took the plunge, so to speak.
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So long as the issue has protections like a reserve fund requirement, rate covenants, or others, I will take any/all utility and infrastructure munis. If the entity carries a negative net position, then I'd think long and hard before purchasing, and likely would pass on it as most others out there have the protections and a strong net position.
 
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njhowie said:
Well of course - but that's exactly the point where the issuer will not call, if the coupon is below their rate to refinance. I try to purchase where I would not be unhappy if they call or are not called.
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One of my rules of thumb is to buy only coupons 3% or higher to improve the likelihood of early redemption. I don't want any lower than that if they don't mature in this decade and deliver at least 2%. I've gotten picky, but if Jamie Dimon is piling up the cash reserve, maybe I should too.

I've read that reverse repo levels are at record levels. Banks don't want to loan any more money as the risk outweighs the return. We're in a low-risk sector, but that doesn't mean the balance can't turn negative for us too. When I have to lock money in for 10 years to earn a point and a half, I prefer the benefit of liquidity to that meager yield.
 
I just put in an order for another bond -- CUSIP 85233SAH1. It's a St. Louis redevelopment bond, 4.5% coupon, 2.1% YTC @ 12/2026. It matures in 2030, so I'd love to see that one string out as long as possible.

Documents show the city is clearing land for the National Geospatial Intelligence Agency. The Moody's rating is a little sketchy at BAA2, but with the feds behind this project it should be OK.
 
I bought a Las Vegas redevelopment bond today -- 3.375% coupon, 2.25% YTC on 6/15/2026. Meanwhile, I got call advisories on my Lee County airport bond and a couple 4% hospital bonds. NJHowie, IIRC you're holding that Lee County paper too. Sorry to see that one go, altho it was due to mature on Oct. 1 anyway.

It's a lot of work to scratch for these little bitty yields, but it's safe money, and yields seem to be edging up just a bit.
 
I've tried to buy a few different munis this week, but haven't gotten any, as I've been trying to bid and shave a few tenths off the ask. I just can't buy what's out there for the yields when I can be very happy putting more in to the two bank preferreds I watch closely - yielding 6%+ (callable in 2025).

Actually, now that I'm looking through my activity, I did get one early yesterday:
CUSIP 85732MWL7 - Northampton Cnty Comm College, PA (I actually took a course there 35 years ago). 5% coupon. Maturity 6/15/2032, YTM = 4.54%, callable 6/15/2022 YTC = 0.363%. This one is a tax free muni in my taxable account.

I did pick up a couple more of the HSBC CDs in the 2.6%-2.9% YTM range for 6 to 7 years, and can be called in next 6 to 12 months.

With the Alaska Airports bonds paying off in a couple weeks, that will give me more to redeploy. We'll see what's available then.
 
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The bonds are dropping like flies. That's six called or marured so far this month. Not unexpected, of course.
I'll have to start searching the CD market.
 
I've been a little wary of college/university bonds, particularly private institutions. A lot of them were under financial stress before the pandemic.

I did see one from Bradley University that was tempted me. Maybe I'll take a second look.
 
Mr._Graybeard said:
I've been a little wary of college/university bonds, particularly private institutions. A lot of them were under financial stress before the pandemic.

I did see one from Bradley University that was tempted me. Maybe I'll take a second look.
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Forgot to mention - my issue is insured, so that was also a draw to it.

Before buying any university bonds, be sure to check the financials and make sure they're solid. When considering the financials, also be sure to include the size of the endowment. I have some 2042 Wellesley College bonds - I don't even think about them, because they are sitting on a $2 billion endowment. Those bonds will never default.
 
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How do they notify bond holders when an issue is called? My bonds are at Fido. I see alerts for various material events but generally have to go to Emma for the details
 
jazz4cash said:
How do they notify bond holders when an issue is called? My bonds are at Fido. I see alerts for various material events but generally have to go to Emma for the details
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The Fidelity alerts do generally (but not always) include bond calls on the date the filing to call is made. Worst case, when it comes up on about 30 days prior, and then again a couple days prior, Fidelity also sends emails. The email has a subject of "Important Bond/CD Redemption Notice". The email I received this morning included the Alaska Airports bonds which were just notified yesterday (which I received the midday alert for), and another issue I have being called on Tuesday next week (which I was previously notified of a few weeks ago).
 
njhowie said:
Forgot to mention - my issue is insured, so that was also a draw to it.

Before buying any university bonds, be sure to check the financials and make sure they're solid. When considering the financials, also be sure to include the size of the endowment. I have some 2042 Wellesley College bonds - I don't even think about them, because they are sitting on a $2 billion endowment. Those bonds will never default.
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Good advice. That's the best part of investing in munis -- the full financial picture is out there in the open if you look for it.

How do they notify bond holders when an issue is called? My bonds are at Fido. I see alerts for various material events but generally have to go to Emma for the details.
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Jazz, I rely on Fido to let me know. They may not be an immediate source, but you'll be notified via the message board in a reasonably timely fashion. In fact, they also email me. Schwab works the same way.
 
Mr._Graybeard said:
Good advice. That's the best part of investing in munis -- the full financial picture is out there in the open if you look for it.







Jazz, I rely on Fido to let me know. They may not be an immediate source, but you'll be notified via the message board in a reasonably timely fashion. In fact, they also email me. Schwab works the same way.
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Thanks Mr_G and Howie. I’ve been getting super passive lately so I’m gonna assume Fido will give timely notice. I can’t recall how I became aware of the Kohl’s special redemption but I knew in time to make a somewhat informed decision. I am glad I did not redeem.
 
njhowie said:
After a disappearance for about a year, Fidelity has begun offering market-linked CDs once again as of a couple months ago. Depending on the terms being offered, I generally pick one of these up each month when they are offered for some diversification (since my AA is 0/99%). Lots of folks are very negative on these. However, I've been extremely happy with them. They are all performing better than I had hoped - about 5%-6% annually thus far.
Click to expand...

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.
 
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njhowie said:
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.
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Thanks for sharing!
 
Upcoming calls of mine:

8/31 - Alaska Airports 10/1/2035 6.284%
9/1 - Cucamonga Valley, CA Water District 9/1/2026 5.0%
9/1 - Oakland, CA Housing 9/1/2022 8.0%
9/8 - Kershaw, SC County Revenue Bonds 6/1/2042 5.3%
 
njhowie said:
Upcoming calls of mine:

8/31 - Alaska Airports 10/1/2035 6.284%
9/1 - Cucamonga Valley, CA Water District 9/1/2026 5.0%
9/1 - Oakland, CA Housing 9/1/2022 8.0%
9/8 - Kershaw, SC County Revenue Bonds 6/1/2042 5.3%
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That Alaska bond has a nicer coupon than mine -- I got only 5%. Not that I'm complaining.

All those coupons look pretty sweet. We won't see many of those for a while.
 
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