Muni Bond (and Muni Bond Fund) Discussion

[Eucerin]

I bought VWIUX before retired (2018) for tax purpose but it only dominates small % of total portfolio. It has been stable with a couple of % up but I enjoy the monthly dividends. Now as Fed has voiced increase rates in the near term, I see that the fund losing 0.01 or 0.02 each day for a week. I always knew that when the rate up and the bond down, but last Friday the 10 yr rate down 7 points and the fund down 0.01, I am not sure now.

The reason I mention this is that the VWIUX isn't serve an initial purpose as intended, I am thinking of sell it but don't want to wait too long to see it turns to red, especially we are pretty sure Fed will increase rates in the future. And I can put the cash into stock as it has going down since the new year

There are some sophisticated bond buyers here (not me), can you offer some insights about this matter?

Thanks ahead

[njhowie]

Appreciate it Freedom. Will have a look and gain a better understanding.

I am seeing some very slight movement with the munis I'd like to buy, but the dealers are still holding firm I'm not seeing any bargains or panicking (yet).

[Mr._Graybeard]

Quote:

Originally Posted by njhowie Appreciate it Freedom. Will have a look and gain a better understanding. I am seeing some very slight movement with the munis I'd like to buy, but the dealers are still holding firm I'm not seeing any bargains or panicking (yet).

Nope, I agree, I just looked. Munis seem to be the one safe haven from this ongoing correction at the moment.

[njhowie]

Quote:

Originally Posted by Mr._Graybeard Nope, I agree, I just looked. Munis seem to be the one safe haven from this ongoing correction at the moment.

I picked up a 30 year insured zero yesterday which I had been playing cat and mouse with the dealer for over a week. We finally met. YTM=6.4%, 2024 YTC=1.5%.

[COcheesehead]

Quote:

Originally Posted by njhowie I picked up a 30 year insured zero yesterday which I had been playing cat and mouse with the dealer for over a week. We finally met. YTM=6.4%, 2024 YTC=1.5%.

Nice!

[COcheesehead]

Starting to see some 2%+ yield to worst, with an at or close to 4% YTM in 10 year ish or less in my state specific muni’s. That’s an interesting change.

[njhowie]

Muni issuer trying to pull a fast one this morning...issued a call notice for March 2 when bonds are not callable until Feb 1, 2023...no extraordinary redemption features or other call features.

On hold with Fidelity fixed income desk while they investigate.


Follow-ups:
1. Fixed income desk agrees with me...they have to pursue further and get back to me.
2. I called the administrator for the bonds at Regions Bank directly and waiting for call back from them

[jazz4cash]

Amazing. Never thought I’d need to worry about a muni issuer pulling a fast one.

I had that Kohl’s note with the voluntary early recall. I could not quite figure out what they were doing, but I had a sense it was all sizzle and no steak. Glad I passed on that.

[Mr._Graybeard]

Looks like the munis are finally starting to move a bit. I see some offering 3% YTW if you don't mind a low-rate coupon or a call seven or eight years away. I saw a housing bond offering a nice YTW, but I'm reluctant to pay a 5% premium on a bond that can get a call out of the blue if borrowers refinance. Still, the refi rush may by history with interest rates moving up.

I've been venturing over to the corporate side a bit; yields are looking better, and the tax advantage of munis has never been my primary interest. My state won't exempt muni interest on even in-state GO bonds.

I just bought a Verizon bond, 4.9% coupon, call date 8/15/2022, for a fraction of a point over face value. YTW is about 3.2%.

Someone is offering a lot of Dow Chemical bonds at an attractive price with 4% coupon. I found a couple with 2020 call dates, so it appears the company is not redeeming its debt early. The bonds are pretty long, with maturity into the 2040s.

[COcheesehead]

If the yield curve inverts…
Longer duration muni’s are looking good.

[Mr._Graybeard]

Quote:

Originally Posted by COcheesehead If the yield curve inverts… Longer duration muni’s are looking good.

I'm not sure it's going to invert. The 30-year treasury is moving up faster than the 10 -- today, at least.

[COcheesehead]

Quote:

Originally Posted by Mr._Graybeard I'm not sure it's going to invert. The 30-year treasury is moving up faster than the 10 -- today, at least.

If the Fed keeps raising short term rates and there is no confidence in longer term growth, we’ll then… We’ll see how things look later in the year.

[Mr._Graybeard]

Quote:

Originally Posted by njhowie Muni issuer trying to pull a fast one this morning...issued a call notice for March 2 when bonds are not callable until Feb 1, 2023...no extraordinary redemption features or other call features. On hold with Fidelity fixed income desk while they investigate. Follow-ups: 1. Fixed income desk agrees with me...they have to pursue further and get back to me. 2. I called the administrator for the bonds at Regions Bank directly and waiting for call back from them

I think there's a lot of internal confusion for some reason -- short staffing, whatever. We've discussed bogus call announcements before. This one is pretty egregious, though.

[njhowie]

Quote:

Originally Posted by COcheesehead If the Fed keeps raising short term rates and there is no confidence in longer term growth, we’ll then… We’ll see how things look later in the year.

Agreed.

Been hearing a number of economists beginning to mention recession if there are more than one or two 1/4 point hikes. Inverted yield curve would likely support/confirm this line of thinking.

[njhowie]

Quote:

Originally Posted by Mr._Graybeard I think there's a lot of internal confusion for some reason -- short staffing, whatever. We've discussed bogus call announcements before. This one is pretty egregious, though.

SUCCESS!!!

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

[njhowie]

Just received call back from Regions Bank. "Oh, we just had the incorrect call date on it".

[njhowie]

Quote:

Originally Posted by Mr._Graybeard Looks like the munis are finally starting to move a bit. I see some offering 3% YTW if you don't mind a low-rate coupon or a call seven or eight years away.

I just picked up a pre-refunded insured zero 2.54% to 11/1/2028. Not fabulous, but a good lock relative to equivalent maturity CD.

[njhowie]

Baird, Thornburg Eye Muni Bonds That Increasingly Look Cheap

https://finance.yahoo.com/news/baird...173845345.html

[perinova]

Quote:

Originally Posted by njhowie Muni issuer trying to pull a fast one this morning...issued a call notice for March 2 when bonds are not callable until Feb 1, 2023...no extraordinary redemption features or other call features. On hold with Fidelity fixed income desk while they investigate. Follow-ups: 1. Fixed income desk agrees with me...they have to pursue further and get back to me. 2. I called the administrator for the bonds at Regions Bank directly and waiting for call back from them

How does a call work? you receive a message a month early and on the day the bond (aka the principal) is automatically returned to your account with interest?

[njhowie]

Quote:

Originally Posted by perinova How does a call work? you receive a message a month early and on the day the bond (aka the principal) is automatically returned to your account with interest?

Correct. They could give notice a month in advance, or it could be more or less in advance depending on the terms of the bond or if they are setting up escrow far in advance. For example, the earliest call date may be a year or more in the future, they set up escrow for remaining payments and tell you they will be calling on that future call date. This might be done when interest rates fall, the bonds are at a higher rate, and they want to refinance now.