Muni Bond (and Muni Bond Fund) Discussion

[jazz4cash]

You must have some nice capital gains on those.

 

[njhowie]

No, not really. Remember, until the call date, any rise in price is going to be constrained by what the YTC comes to. I've previously mentioned my own willingness to gamble with negative YTC in the very short term - under say 3 to 6 months. However, now that interest rates have risen, there is less willingness.

Keep in mind, with zeroes, if they are called, it is not at 100, it's at some other predetermined price. For example, this zero I just bought, I paid 30 for it (including 0.1 markup). If it is called on 8/15/24, the call price is 31.896. So, how much would you pay for this bond, that pays no interest, and can be called at 31.896 in 2.5 years?

 

[jazz4cash]

So that explanation makes me think I’ve been correct to avoid them until i get more knowledgable. I might need to dip a toe in the water. That always forces me to focus and learn.

I was also concerned with the de minimus impact due to the discount from par. Isn’t that a factor also?

 

[njhowie]

De minimis does not apply to zero coupon bonds in the way I believe you're thinking about it. Though it is easy to understand why one might automatically believe it is.

I haven't looked into it deeply, but I believe de minimis may apply, if the purchase price is sufficiently enough below the "adjusted issue price", which is continually increasing over time on a zero coupon bond.

 

[njhowie]

SUCCESS!!!

Rescinded Notice of Redemption dated 01/31/2022
https://emma.msrb.org/P21541600-P21191578-P21610145.pdf

Was there ever any explanation for how this blunder occurred?

The blunder just got worse!

Guess I'll be on the phone with Fidelity's fixed income folks this morning.

Now, the funny thing is that the issuer/administrator corrected the blunder on their end with the Rescind notice, and then a week ago, making a corrected filing, calling the bonds on the right call date in a year and defeasing the bonds:
https://emma.msrb.org/P11570193-P11212225-P11632496.pdf

If you pull up the muni on Fidelity's website, the correct info shows up - pre-refunded and maturity date of 2/1/2023.

So I'm curious as to who is responsible for today's blunder? Issuer? Administrator? DTC? Fidelity? Any wagers?

 

[njhowie]

Called about an hour ago. They said they'd investigate and get back to me.

Transactions within my Fidelity account have just been reversed. No explanation, just a voice message indicating it's been done. I have the bonds back.

 

[jazz4cash]

WOW.

 

[njhowie]

I was playing cat and mouse on a couple of munis all day long. I was able to get the asks down on both, which was interesting considering how the ten year yield was also falling throughout the day.

The one I ended up buying just before the close:
639707BD9 - Univ of Nebraska Utility Corp 5% Coupon AA1/AA
1/1/2024 YTC=2.034%
1/1/2033 YTM=4.383%

I already own some of them, so felt comfortable adding more. This one is taxable in my IRA.

 

[Mr._Graybeard]

I put in an order for an Illinois GO, 4% coupon, YTW 3.3% with a 2029 call date. CUSIP 4521525Z0.

 

[njhowie]

I put in an order for an Illinois GO, 4% coupon, YTW 3.3% with a 2029 call date. CUSIP 4521525Z0.

Looks like someone got it about 5 minutes before your post.

 

[Mr._Graybeard]

Looks like someone got it about 5 minutes before your post.

Hopefully, that was me. My Fido account activity shows me as the buyer.

 

[njhowie]

Hopefully, that was me. My Fido account activity shows me as the buyer.

Good job!

 

[njhowie]

Just taking some inventory this morning - I still have 47 CDs with yields above 3% maturing between now and 2029. Maybe 5 of them are callable.

Trying to map out my strategy for what point I begin buying again - I'm guessing 3% for 5 years is a good place.

 

[pb4uski]

3% for 5 years has been my target recently... but we're a ways away from that with 5 year brokered CDs at 2.2% and with inflation kicking up I may need to reassess that.

 

[jazz4cash]

The 5yr A rated MYGA is back to 3%. Not as good as a tax free muni but I plan to buy a bit.

 

[jazz4cash]

Anybody watching tonights episode of Billions? Could be interpreted as derogatory wrt NYC transit bonds. No attempt to anonymize the bond issuer. Hopefully not many are paying attention. These issues already under plenty of scrutiny due to Covid.

 

[njhowie]

Anybody watching tonights episode of Billions? Could be interpreted as derogatory wrt NYC transit bonds. No attempt to anonymize the bond issuer. Hopefully not many are paying attention. These issues already under plenty of scrutiny due to Covid.

Yes, I watch it every week. Same thing they always do and many other shows - throw something in related to current events. Remember in the early episode this season when Wags had a heart attack on the Peloton? Andrew Ross Sorkin is a producer on the show - you know, he is on CNBC every morning and writes for NY Times Business Section/Dealbook.

 

[jazz4cash]

I never even thought about the Peloton reference. Was the company mentioned by name? There are many exercise bike vendors so this still stands out to me. I also recall a tainted sports drink episode but i never connected it to a specific brand. I don’t even have dry powder to take advantage of a dip. I remember when the Fido listings were stacked with NYC trsnsir munis but not lately.

 

[njhowie]

I never even thought about the Peloton reference. Was the company mentioned by name?

Here, check this out...
https://www.thewrap.com/peloton-billions-wags-heart-attack-and-just-like-that-mr-big/

 

[njhowie]

Muni Bonds Reach Cheapest Level Since 2020 as Citigroup Says It’s Time to Buy

https://finance.yahoo.com/news/muni-bonds-reach-cheapest-level-174127809.html

 

[jazz4cash]

I didn’t find any screaming deals but i settled for 574218PD9, a hospital bond from my home state w/ 3.2 YTM in 8 years.

 

[njhowie]

I didn’t find any screaming deals but i settled for 574218PD9, a hospital bond from my home state w/ 3.2 YTM in 8 years.

That's a nice yield for tax free. I see YTC=2% for 2.5 years, which is also decent.

 

[jazz4cash]

I was planning to buy a 5 yr MYGA at 3.05 with that money. This is way better. I was tempted to buy a similar issue with a call date in August of this year just to see if it actually gets called. I still might do it if I can find the funds.

 

[njhowie]

Just picked up 28 months for 3.5% YTM, not callable.

 

[jazz4cash]

Just picked up 28 months for 3.5% YTM, not callable.

Nice catch!
I may need to look more closely at shorter terms. Im seeing a few more tiny deals that fit my budget but may not attract deeper pockets. Probably others like me dumping their bonds for whatever reason.