Muni Bond (and Muni Bond Fund) Discussion

[njhowie]

How is everyone's fixed income doing?

No change for me - muni calls keep rolling in regularly. I do my best to reinvest in others with acceptable returns.

I mentioned elsewhere having begun a regular/automatic investing plan with the U-Haul notes - which I had to stop a couple weeks ago as they lowered the yields on all new ones to a point where they also no longer make any sense (in my view). For all the talk of rates having to rise, I haven't seen any evidence of it happening whatsoever. It's as if the bond market does not believe it's going to happen. 10-year simply does not want to stay above 1.6%. Muni dealers continue holding prices up and yields down. I find myself now regularly picking up the tax free munis in my IRA because the yields are as good as or better than equivalent maturity taxables available, with better terms, and most with bond insurance.

I'm seeing economists/analysts beginning to say that as a result of inflation numbers, they believe Powell will find himself having to raise rates later this year, well ahead of what he's been publicizing recently. Powell contends the high inflation numbers are only temporary and will go back down, but the economists/analysts are saying they don't believe that, and the Fed should make their models available that show how they are coming up with that conclusion. I won't hold my breath.

[Mr._Graybeard]

I think one of the big inflation drivers right now is the low inventory levels of available goods. A lot of the manufacturing economy worldwide was dormant for a year, and as demand is picking up there's too much money chasing too little product. The computer chip shortage is a good example. As I mentioned in another thread, I ordered a new truck in February and may see it in July. To wait almost five months for a new Ford suggests a serious supply-chain bottleneck.

I would expect inventories to grow in time to meet demand, but some big exporters of manufactured goods are still struggling with Covid. So it may be awhile.

As for commodities, this article shows July 2022 contracts down broadly from contracts that expire in July 2021. It's just a snapshot, but there it is. https://www.pionline.com/interactive...y-prices-spike

As for munis, I did buy one of the Texas MUD bonds that have been plentiful on the secondary market lately. 3% coupon, call in 2023 with a 1.94% YTW. Meanwhile, Vermont called a piece of my student loan bond. Started out at $50K, now down to $20K. I expected lots of partial calls when I bought it, and the issuer has fulfilled my expectations.

I also got into a tax-deferred 3-year fixed annuity @ 1.7%. Tax-deferred compounding should help that rate a little.

The inflation panic may produce a buying opportunity. We'll see. Keep your powder dry!

[njhowie]

Quote:

Originally Posted by Mr._Graybeard I think one of the big inflation drivers right now is the low inventory levels of available goods. A lot of the manufacturing economy worldwide was dormant for a year, and as demand is picking up there's too much money chasing too little product. The computer chip shortage is a good example. As I mentioned in another thread, I ordered a new truck in February and may see it in July. To wait almost five months for a new Ford suggests a serious supply-chain bottleneck. I would expect inventories to grow in time to meet demand, but some big exporters of manufactured goods are still struggling with Covid. So it may be awhile.

Agreed. We've also seen this first hand in the car rental market. Earlier this year we reserved a car in Orlando for the trip we did two weeks ago. I always make the initial reservation the moment we decide we're going, even if it's 6 months in advance. There's no harm as you don't have to provide a credit card and it's easy to cancel and rebook if prices go lower. So the rate we had was $188/wk plus taxes/fees bringing it to $264 - which in general is more than we usually pay. I'm usually able to find something in the $99 to $149 range (before taxes/fees). However, we were going to be doing a bit of driving this time visiting family in Ft. Lauderdale a few days and then driving back to Orlando, so I didn't mind having to pay a bit more. Well, as Covid restrictions were lifted and folks decided they were going to travel, because all the rental car companies reduced their fleets selling lots to fight off potential bankruptcy a year ago, rental rates shot up as the companies were caught off-guard. Weekly rates of $300 to $500 before taxes and fees were now the cheapest.

We just made flight reservations to go again in September. For the 5 days we're going, currently the car rental rates are $550 to $700! We won't be renting if they don't come way back down by then. We won't be driving as much, so Uber/Lyft for 5 days certainly won't come anywhere near those amounts just staying in the local area.

[njhowie]

Quote:

Originally Posted by njhowie This particular JPM is 3.05% with 2030 maturity and has been callable since May 2018. They must have some kind of mistake in their system that they aren't calling them. They can only call on the interest dates, so if they don't call in a few weeks, then it goes until at least November.

I just checked, they didn't call again - the date for it was May 17.

[aja8888]

Quote:

Originally Posted by Mr._Graybeard I think one of the big inflation drivers right now is the low inventory levels of available goods. A lot of the manufacturing economy worldwide was dormant for a year, and as demand is picking up there's too much money chasing too little product. The computer chip shortage is a good example. As I mentioned in another thread, I ordered a new truck in February and may see it in July. To wait almost five months for a new Ford suggests a serious supply-chain bottleneck. I would expect inventories to grow in time to meet demand, but some big exporters of manufactured goods are still struggling with Covid. So it may be awhile. As for commodities, this article shows July 2022 contracts down broadly from contracts that expire in July 2021. It's just a snapshot, but there it is. https://www.pionline.com/interactive...y-prices-spike As for munis, I did buy one of the Texas MUD bonds that have been plentiful on the secondary market lately. 3% coupon, call in 2023 with a 1.94% YTW. Meanwhile, Vermont called a piece of my student loan bond. Started out at $50K, now down to $20K. I expected lots of partial calls when I bought it, and the issuer has fulfilled my expectations. I also got into a tax-deferred 3-year fixed annuity @ 1.7%. Tax-deferred compounding should help that rate a little. The inflation panic may produce a buying opportunity. We'll see. Keep your powder dry!

Mr._Graybeard, would you mind supplying me with that Texas MUD Bond Cusip ID, thanks!

[Mr._Graybeard]

Quote:

Originally Posted by aja8888 Mr._Graybeard, would you mind supplying me with that Texas MUD Bond Cusip ID, thanks!

The CUSIP of the one I bought is 346900QZ9. But there are quite a few others. A lot of them are insured, which is nice.

[jazz4cash]

I’m not looking for anything right now. I get notified by FIDO for new issue local munis. They are pathetically low and Fido only gives one days notice. Who is buying these things?
My 1st muni, a university hospital bond is a superhero. My NYC transit bonds are steady even with downgrades and credit warnings. One is due this year and the other not callable (I think) until 2025. I let that call premium on a Kohl’s issue pass me by. I think it was the right decision. I’m looking out for some new issues related to redevelopment for the state horse racing industry. As far as fixed income my 1st option right now is a MYGA for 5 yrs @ 2.7ish.

I also keep forgetting about my NFCU add-on CD. It’s 3% with 2+ yrs to go.

[aja8888]

Quote:

Originally Posted by Mr._Graybeard The CUSIP of the one I bought is 346900QZ9. But there are quite a few others. A lot of them are insured, which is nice.

Thanks!

[njhowie]

Quote:

Originally Posted by Mr._Graybeard The CUSIP of the one I bought is 346900QZ9. But there are quite a few others. A lot of them are insured, which is nice.

Below are the ones I have - lower YTC than yours, but higher YTM. I bought the first one just yesterday. aja - Fidelity is currently showing there are still 10 available. I paid 106.97 + 0.1, so if you are interested, you might be able to get it lower than the ask of 107.337 currently showing. It is insured with 12/2022 call. Low YTC, but still ahead of comparable maturity CD, and tax free. If they don't call, then you get 5% thereafter. I reviewed their financials - very solid...revenues almost $50 million above expenses in 2020, net position of $300 million with $290 million cash + investments.

65956NDL7
82620TNR1
92823PCY0
92823PDF0
684728JY5
684728KG2

[Mr._Graybeard]

Quote:

Originally Posted by jazz4cash I’m not looking for anything right now. I get notified by FIDO for new issue local munis. They are pathetically low and Fido only gives one days notice. Who is buying these things? My 1st muni, a university hospital bond is a superhero. My NYC transit bonds are steady even with downgrades and credit warnings. One is due this year and the other not callable (I think) until 2025. I let that call premium on a Kohl’s issue pass me by. I think it was the right decision. I’m looking out for some new issues related to redevelopment for the state horse racing industry. As far as fixed income my 1st option right now is a MYGA for 5 yrs @ 2.7ish. I also keep forgetting about my NFCU add-on CD. It’s 3% with 2+ yrs to go.

That MYGA rate is nice -- I'd go out 5 years for that under current conditions.

[Mr._Graybeard]

Quote:

Originally Posted by njhowie Below are the ones I have - lower YTC than yours, but higher YTM. I bought the first one just yesterday. aja - Fidelity is currently showing there are still 10 available. I paid 106.97 + 0.1, so if you are interested, you might be able to get it lower than the ask of 107.337 currently showing. It is insured with 12/2022 call. Low YTC, but still ahead of comparable maturity CD, and tax free. If they don't call, then you get 5% thereafter. I reviewed their financials - very solid...revenues almost $50 million above expenses in 2020, net position of $300 million with $290 million cash + investments. 65956NDL7 82620TNR1 92823PCY0 92823PDF0 684728JY5 684728KG2

I'll take a look, thanks.

[aja8888]

Quote:

Originally Posted by njhowie Below are the ones I have - lower YTC than yours, but higher YTM. I bought the first one just yesterday. aja - Fidelity is currently showing there are still 10 available. I paid 106.97 + 0.1, so if you are interested, you might be able to get it lower than the ask of 107.337 currently showing. It is insured with 12/2022 call. Low YTC, but still ahead of comparable maturity CD, and tax free. If they don't call, then you get 5% thereafter. I reviewed their financials - very solid...revenues almost $50 million above expenses in 2020, net position of $300 million with $290 million cash + investments. 65956NDL7 82620TNR1 92823PCY0 92823PDF0 684728JY5 684728KG2

Thanks, I'll look too! I need to do something with some cash in my brokerage account.

[Amethyst]

Supply chains around the world are still messed up. I just ordered four new cane seats for our vintage Breuer chairs, and was informed it would take at least 14 weeks to get them, due to COVID-related manufacturing/supply chain/shipping issues in Italy, where they come from. The U.S. seller was completely sold out of Breuer chair components.

The last time I ordered these seats (a couple of years ago...they don't last the way they used to) we got them in 2 weeks because the U.S. company had plenty in stock.

Quote:

Originally Posted by Mr._Graybeard I think one of the big inflation drivers right now is the low inventory levels of available goods. ... I would expect inventories to grow in time to meet demand, but some big exporters of manufactured goods are still struggling with Covid. So it may be awhile.

[jazz4cash]

Quote:

Originally Posted by Mr._Graybeard That MYGA rate is nice -- I'd go out 5 years for that under current conditions.

It’s the A rated Americo MYGA that’s been mentioned here before. I got it in late December when it was 3.05. Learned a lot about MYGAs on the Blueprint Income website.

[njhowie]

My 2042 Fontana, CA 8.413% revenue bonds (city lease payments) were callable as of September 2020 - and haven't been called yet. Financials continue to look good, so not understanding why they haven't moved to refinance them. I'm certainly not complaining though.

I bought them in June 2020 and YTC on my purchase date, assuming the September call was 1.38% (annualized) for the three months.

This one has worked out well, for however long it continues not being called.

https://emma.msrb.org/Security/Details/344610BY5

[njhowie]

One of my past call date continuously callable munis has gone bonkers.

Cusip: 235308RA3
https://emma.msrb.org/Security/Details/?id=235308RA3

Check out the trading since yesterday - and specifically the volume. The mark to market on the bonds was 100.xx on Friday as they are continuously callable - can be called at any time on 30 days notice.

When I woke up this morning and looked at my account, I expected the value to be flat to slightly down. However, the value was up. When I searched through my (muni heavy) holdings, it was specifically because the mark to market on this one muni had jumped to 104.xx.

I checked the disclosures for any new filings, and there haven't been any for the bonds, or the issuer. The last filing a month ago coincidentally was for a bond call - where the coupons were all 5%. They've got to be looking to refinance these, which are 6.45%.

So, this morning I put in a bid request figuring if I could get 104+, as that's where it was trading, that's about 8 months worth of interest and I'd sell. When the best bid came back at 101.415, I said no way. That was at 9AM. However, later at 1PM, I received a revised best offer of 103.35 (22 bids at 9AM, now 25 bids). After thinking about it for a few minutes, I decided to take it - that's still 6 months worth of interest I could capture now. So, if they call within 6 months, I've come out ahead (assuming I don't make anything additional on the money). If they don't call in the next 6 months, then it would have been better to hold. I still have 5 of these bonds in another account. When I requested a bid on those at about 3:30PM, the best bid came back at 100.8 - yet there were still hefty trades going through at 104.x-105. I'll request a bid on these again in the morning and see if I can get better...or if I see a dealer post some for sale, I'll slip in front of him.

[jazz4cash]

Keep us posted on those Fontana bonds.

The last two new issue offering notices I’ve received from Fido are trending a bit higher. These are MD and local county housing issues with .5-1.0 coupons for 3-5 yrs at par. That’s a MM alternative. I was tempted but my home state muni fund is still paying 2% annualized. I haven’t checked avg maturity lately. Maybe time to look around for some mis priced issues.

[njhowie]

I'm on a list at TD to get notice of new muni issues. Here's the one they sent this morning:

Quote:

Order Period* 06/09 9:00am Eastern - 06/09 4:00pm Eastern Yield* 0.060% - 1.930% Issuer THE COMMONWEALTH OF MASSACHUSETTS; COMMONWEALTH TRANSPORTATION FUND; REVENUE BONDS; (RAIL ENHANCEMENT PROGRAM); 2021 SERIES A (SUSTAINABILITY BONDS); 2021 SERIES B; REVENUE REFUNDING BONDS; 2021 SERIES A Purpose Miscellaneous Moody's/S&P Rating* Aa1/AA+ Maturity* 06/01/2022 - 06/01/2051 Callable Yes Payment Frequency* Semi-Annually

[Mr._Graybeard]

1.93% with maturity in 2051? That's almost insulting. It reminds me of an old Steve Miller tune: "Your Cash Ain't Nothin but Trash."

[njhowie]

Quote:

Originally Posted by Mr._Graybeard 1.93% with maturity in 2051? That's almost insulting. It reminds me of an old Steve Miller tune: "Your Cash Ain't Nothin but Trash."

Agree - absolutely no consideration for risk. Funny thing is, they will get it sold relatively easily. Which begs the question on all of my high yielders which are currently callable but haven't been - what are they waiting for?