Muni Bond (and Muni Bond Fund) Discussion

[Mr._Graybeard]

Quote:

Originally Posted by njhowie 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?

Hard to figure. I have a small 4% coupon bond from the Indian Trail District in Palm Beach County that has been callable since 2015. Hopefully they'll be able to come up with my principal when the bond matures in August.

[jazz4cash]

Quote:

Originally Posted by Mr._Graybeard Hard to figure. I have a small 4% coupon bond from the Indian Trail District in Palm Beach County that has been callable since 2015. Hopefully they'll be able to come up with my principal when the bond matures in August.

I might hope they’d just keep paying the coupon for awhile till they can come up with the principal.

[njhowie]

Hopefully this means the end is near for the low rates/yields we've had to deal with. Seems to me this is a good signal not to buy anything at this time with maturity further out than maybe a year or two at most.

https://finance.yahoo.com/news/jpmor...174142959.html

[Mr._Graybeard]

Part of the problem is that states/munis have been reluctant to embark on capital projects. If funding for infrastructure impprovements moves forward, maybe that'll change. Then we'd see some new borrowing instead of just refinancing of current debt.

[njhowie]

Quote:

Originally Posted by Mr._Graybeard Part of the problem is that states/munis have been reluctant to embark on capital projects. If funding for infrastructure impprovements moves forward, maybe that'll change. Then we'd see some new borrowing instead of just refinancing of current debt.

In general though, whether we're talking about munis, CDs, treasuries, or other fixed income instruments, we should (hopefully) be seeing higher rates sooner rather than later.

[Mr._Graybeard]

Sure, and I'm sitting on some cash myself, waiting for better rewards -- just like Jamie. I look forward to a cocktail party where I can drop the news that the JPM chief and I share a mutual strategy.

[njhowie]

Bond market does not believe Powell/Fed - acting as if rates will likely never be raised.

The 100 year bonds I periodically play with moved higher, yields fell to 3.1%-3.5% for maturities in the year 2110+. I sold the few I still had.

I had some 7.55% Disney corporate bonds maturing 7/15/2093 with call date 7/15/2023. Now, logic would indicate these really shouldn't be trading at more than something around 115.1 (2 years worth at 0%) - or less if you want to account for some return assuming a hold until 7/15/2023. I sold mine ~117. Disney just issued new 40 year debt at 3.8% a few weeks ago, so folks have to be foolish to believe they won't redeem 7.55% debt the first chance they get. So, whoever bought mine at 117 is guaranteed a loss, unless they can sell to a bigger fool in the next two years.

I was able to pick up a muni with 2024 maturity yielding ~3.25%, but can be called June 2022 with YTC ~0.65%. I thought those were pretty good yields for the call/maturity dates.

[nwsteve]

Quote:

Originally Posted by njhowie Bond market does not believe Powell/Fed - acting as if rates will likely never be raised. The 100 year bonds I periodically play with moved higher, yields fell to 3.1%-3.5% for maturities in the year 2110+. I sold the few I still had. I had some 7.55% Disney corporate bonds maturing 7/15/2093 with call date 7/15/2023. Now, logic would indicate these really shouldn't be trading at more than something around 115.1 (2 years worth at 0%) - or less if you want to account for some return assuming a hold until 7/15/2023. I sold mine ~117. Disney just issued new 40 year debt at 3.8% a few weeks ago, so folks have to be foolish to believe they won't redeem 7.55% debt the first chance they get. So, whoever bought mine at 117 is guaranteed a loss, unless they can sell to a bigger fool in the next two years.

NJ--Any guidelines, rules of thumbs, tools to alert a person it is time to sell their bonds. We have some with decent gains (23-24's issues) that have appreciated to point that current pricing give yields that are half of what we are getting. When I think of selling I have not seen any way I have any likelihood of replacing the yield. Thanks

[njhowie]

Quote:

Originally Posted by nwsteve NJ--Any guidelines, rules of thumbs, tools to alert a person it is time to sell their bonds. We have some with decent gains (23-24's issues) that have appreciated to point that current pricing give yields that are half of what we are getting. When I think of selling I have not seen any way I have any likelihood of replacing the yield. Thanks

That's certainly the crux of the matter.

In general, my rule of thumb has always been to sell if the yield at my selling price is less than or equal to equivalent maturity CD. I've been a regular seller of bonds in my portfolios over the past two years as things become quite frothy and overvalued.

I've had fairly good luck finding reasonable replacements as I've gone along. Sometimes it just takes a bit of effort for a couple weeks and waiting for the right ones to show up at the right price.

[njhowie]

Just happened this morning...


https://emma.msrb.org/Security/Details/?id=969535AJ2


Dealer steals bonds from desperate retail investor at 87.495, turns around handing them off at 101.995


Gotta be careful, friends. Don't get caught behind the 8-ball.

[jazz4cash]

Oh wait. I thought you meant steal literally.
Am I reading that link correctly? It looks like most of the markup was dealer to dealer. What does that mean?

[njhowie]

Quote:

Originally Posted by jazz4cash Oh wait. I thought you meant steal literally. Am I reading that link correctly? It looks like most of the markup was dealer to dealer. What does that mean?

When you sell your bonds, you aren't selling to another customer who is buying, it's always going through a dealer, and each dealer is taking his bit of markup. After you sell to a dealer, he/she may sell to another dealer or to the ultimate customer who is buying. So, along the way there may be multiple dealer to dealer transactions.


It doesn't change the fact that in this instance, the dealer who bought from the selling retail customer paid him 87.495 when mark to market was 102.xx.


That there were 5 dealer to dealer transactions before the ultimate buyer purchased shows just how much fat there was, with the eventual buyer paying 105.04 - 20% above the sale!

[jazz4cash]

I didn't even see the multiple trades listed at 11:40 ahead of the customer sell. Seems really inefficient to have multiple middlemen between the customer sell and final purchase.

[njhowie]

Quote:

Originally Posted by jazz4cash I didn't even see the multiple trades listed at 11:40 ahead of the customer sell. Seems really inefficient to have multiple middlemen between the customer sell and final purchase.

There was a fintech company that was going to revolutionize the muni bond market - having direct seller to buyer transactions through their platform. As I recall, it really didn't go anywhere because their model was too complicated and they couldn't get anyone to use it.

[jazz4cash]

Quote:

Originally Posted by njhowie There was a fintech company that was going to revolutionize the muni bond market - having direct seller to buyer transactions through their platform. As I recall, it really didn't go anywhere because their model was too complicated and they couldn't get anyone to use it.

Well, stubhub figured out how to do it. It seems to me many fintechs are mostly about having an idea and raising money.

[njhowie]

Here's a recent video/segment on munis from TD. It confirms everything we've been discussing here and uses the same figures out of the Moody's muni report which I've previously referenced. Bottom line, munis are a safe/reliable investment.

https://tdameritradenetwork.com/vide...GaWBeiDjwl8AjA

[njhowie]

Graybeard - our Lee County Airport bonds were called - August 15:

https://emma.msrb.org/P21473911-P21143258-P21556680.pdf

[Mr._Graybeard]

Quote:

Originally Posted by njhowie Graybeard - our Lee County Airport bonds were called - August 15: https://emma.msrb.org/P21473911-P21143258-P21556680.pdf

I hadn't been notified of that by fidelity (yet) ... the bond matured Oct 1, so they're jumping through hoops to save 45 days worth of interest. Meanwile, in alaska they're letting that 5% paper ride.

I had $30k of bonds called today. A couple-three are getting called or maturing each month through October. I'm going to be sitting on a bit of cash at the end of the year.

Some small opportunities do pop up -- I bought a $10k indiana hospital bond yesterday, CUSIP 45506DXQ3 -- 2.1% YTW with a 9/2026 call date. It won't make me rich, but at least the money is working.

[njhowie]

Quote:

Originally Posted by Mr._Graybeard I hadn't been notified of that by fidelity (yet) ... the bond matured Oct 1, so they're jumping through hoops to save 45 days worth of interest. Meanwile, in alaska they're letting that 5% paper ride.

Mine are the 2027s, so they save a bit on mine.

Quote:

I had $30k of bonds called today. A couple-three are getting called or maturing each month through October. I'm going to be sitting on a bit of cash at the end of the year.

I had two calls and one maturity today, one call coming next week.

Quote:

Some small opportunities do pop up -- I bought a $10k indiana hospital bond yesterday, CUSIP 45506DXQ3 -- 2.1% YTW with a 9/2026 call date. It won't make me rich, but at least the money is working.

You got a good deal on that purchase - the purchases before and after you were at ~107.53.

Today in my IRA I purchased 64763FQK8 - New Orleans GO insured (taxable). 3.9% YTM in 2027, 1.29% YTC September next year. In my taxable account, I picked up some 2043 Forney, TX GO insured zeroes (tax free). I've been picking up a lot of these of various longer term maturities as they've been available over the past year or two, for both my taxable and IRA accounts. Maturities in 2041 through 2053 and YTM of 5.7% to 7.0% with call dates in 2023 and 2024 YTC of 1% to 2.3%. If these get called, at those times I am going to be flooded with cash.

[Mr._Graybeard]

You're buying up zeroes, Howie? It seems like there are a lot of them on the secondary market lately. Yields look above average if you're willing to forgo the cash flow in favor of the payoff later on.