Muni Bond (and Muni Bond Fund) Discussion

I think there have been more compelling deals in other types of bonds. Still keeping an eye on munis though.
 
jazz4cash said:
I was thinking the opposite due to supply/demand for corporates and CDs. Guess I should get some hard data.
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I think that's what he meant - that the yield had peaked...prices going higher.
 
Does anybody know of a price calculator online for determining the tax impact of the de-minimus rule on muni bonds? Currently if I go to Fidelity and check the secondary market for longer dated muni bonds the yields are artificially high due to the bonds being offered at such a discount.

Is it fair to assume that you will only get the muni tax benefit on the actual coupon rate of the bond and the difference between the YTM/YTW and the coupon will be taxable as income at maturity?

For example, there is currently a 10yr NJ GO bond that has a coupon of 2% and a YTW offer of 4.72%. The offer price isroughly 79 so the de-minimus rule would certainly come into play. To me it seems like the 2% coupons would be federally tax free but the 2.72% difference between the coupon and the YTW will be due to the price discount so that would be considered a capital gain at maturity and subject to regular income taxes (due to de-minimus). Do I have this correct or is the math more complicated?

Thanks!
 
swk7907 said:
Does anybody know of a price calculator online for determining the tax impact of the de-minimus rule on muni bonds? Currently if I go to Fidelity and check the secondary market for longer dated muni bonds the yields are artificially high due to the bonds being offered at such a discount.

Is it fair to assume that you will only get the muni tax benefit on the actual coupon rate of the bond and the difference between the YTM/YTW and the coupon will be taxable as income at maturity?

For example, there is currently a 10yr NJ GO bond that has a coupon of 2% and a YTW offer of 4.72%. The offer price isroughly 79 so the de-minimus rule would certainly come into play. To me it seems like the 2% coupons would be federally tax free but the 2.72% difference between the coupon and the YTW will be due to the price discount so that would be considered a capital gain at maturity and subject to regular income taxes (due to de-minimus). Do I have this correct or is the math more complicated?

Thanks!
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The yields are not artificially high, they represent a rising interest rate market and that’s what happens to low coupon bonds - they sell below par. It should be a fairly easy equation to figure out the cap gains in the sub par price back to par on top of the tax free coupon. It’s a spreadsheet calculation,
 
I plan to do some muni shopping today for my mom's 18 month ladder. Is time of day important? I suspect these offerings are not popping in and out of the list (on Fidelity) , so probably not. I looked at muni defaults and they were rare, but I noticed places like Puerto Rico, so I'll steer clear of those, and stay away from B or less. And go in knowing treasuries are 4.7% as a sanity check. Otherwise, just pick a high YTM?
 
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sengsational said:
I plan to do some muni shopping today for my mom's 18 month ladder. Is time of day important? I suspect these offerings are not popping in and out of the list (on Fidelity) , so probably not. I looked at muni defaults and they were rare, but I noticed places like Puerto Rico, so I'll steer clear of those, and stay away from B or less. And go in knowing treasuries are 4.7% as a sanity check. Otherwise, just pick a high YTM?
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In general, stay clear of anything that does not have a rating beginning with A and you'll have no worries. If you want to increase your safety, additionally choose a bond which has insurance, then you'll have even fewer worries.

As far as treasuries and 4.7%, that is just for one year, 18 month is around 4.6%. If you're going to be putting the money into a muni, you're going to get the most bang for the buck, and better risk/reward (in my view), if you choose a maturity a bit further out. If you do have a need for the funds in one year, or 18 months, unless you are getting something ridiculously better than the treasury (which likely won't be the case), then just take the treasury or equivalent maturity CD. For 18 month taxable muni today, you're looking at 5.0%-5.2%, tax free maybe 3.4%. You're likely better off with the treasury, or 4.85% you can lock in with a non-callable 18 month new issue CD.
 
It was saying the taxable munis I was looking at were .75% more than the comparable treasury, but I didn't dig any farther than (what it said on one of those reports Fidelity generates). I decided on a 5.3% YTM muni of 17 months duration. Not sure it was the smartest decision considering treasuries and CD's, but it has been a taxable muni ladder, so I kept it that way.

I looked it up on finra and saw my transaction, my price, and two other transactions, same quantity, at a price of $0.10 less at the same moment (likely moments before), which is probably Fidelity's $1 per bond.
 
sengsational said:
I looked it up on finra and saw my transaction, my price, and two other transactions, same quantity, at a price of $0.10 less at the same moment (likely moments before), which is probably Fidelity's $1 per bond.
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Yours was the only transactions. The others are the movement from the seller between dealers and you. The transaction just before yours is Fidelity receiving it and then finally giving it to you with the $1 markup.

What is the CUSIP?
 
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sengsational said:
I plan to do some muni shopping today for my mom's 18 month ladder. Is time of day important? I suspect these offerings are not popping in and out of the list (on Fidelity) , so probably not. I looked at muni defaults and they were rare, but I noticed places like Puerto Rico, so I'll steer clear of those, and stay away from B or less. And go in knowing treasuries are 4.7% as a sanity check. Otherwise, just pick a high YTM?
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I guess you are referring to the secondary market? I'm not sure how it works but I do check the New Issues tab at Fido and there is a long list of munis that are pre-settlement (I think). Those seem to be getting more attractive but the maturities are a bit far out for my taste. I subscribe to an alert from Fidelity for new issues from my home state and a neighboring state.
 
sengsational said:
I plan to do some muni shopping today for my mom's 18 month ladder. Is time of day important? I suspect these offerings are not popping in and out of the list (on Fidelity) , so probably not. I looked at muni defaults and they were rare, but I noticed places like Puerto Rico, so I'll steer clear of those, and stay away from B or less. And go in knowing treasuries are 4.7% as a sanity check. Otherwise, just pick a high YTM?
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18 months seems short, but we all have our own goals.
All else being equal, I will try and buy my own state munis first. They then become double tax free. I will also buy a GO bond before a revenue bond since the source of their income is broader, but I own big chunks of both. So there’s that. Yields are usually better on revenue bonds. Trading is sparse on munis so time of day does not matter. If you are buying a large lot, NJhowie has had good luck with entering limit orders so you may get them for less than ask. I rarely have a limit order go through.
Otherwise, good hunting. Oh and read the MEs - lots of good info there.
 
njhowie said:
Yours was the only transactions. The others are the movement from the seller between dealers and you. The transaction just before yours is Fidelity receiving it and then finally giving it to you with the $1 markup.

What is the CUSIP?
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I can't find the CUSIP on the finra site, but it's in this list at 9:42
 
10-year treasury can't hold 3.5%, blows through it to the downside.

Next stop 3.0%.

2-year/10-year spread is now at a ridiculous amount. I believe it's never been as wide as now, almost negative 1.3%.
 
Anyone have any good/great recent purchases they've made? Give us the CUSIP and details.

I continue picking up short, intermediate, and longer term issues. Happy with them all. I can be very happy with 6% and higher for strong longer term issues.

On Friday, just before market close, I sold all of mom's remaining oil stocks that she's held forever. Wanted to get it all in for 2022 taxes and be done with them. Been moving the proceeds into CDs, treasuries, and munis this week. Happy to be done with the oils because of all the volatility over the past few years. Very happy to have gotten her out at/near the all-time highs on XOM and COP. Had heart palpitations a few times with them just three years ago.
 
jazz4cash said:
I think I may be going to the dark side (equities).
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Well, everyone has "some" equities...even me. Question is, what is the allocation, 20%,40%, 60%, 80%? You still have your MYGAs and CDs, no?
 
I am 70ish stocks. Maturing fixed income securities are getting redeployed to current needs, medium term fixed, and equities. Maybe. The fixed income is performing quite well. Ladder is filling up and I just realized my current needs will be met by SS once I decide to start.
 
I still scan munis and will buy an occasional one for my taxable account ladder. There have been so many taxable bonds that pay higher yields even with the taxation included that is where most my maturing bond money goes.

As for equities. I am at 25%. Will slowly increase that over 2023. I can’t ever see myself holding more than 35-40%. My plan works at a minimal equity allocation.
 
Strong jobs numbers, Fed will continue raising rates (so they say), and yet the 10-year yield is off by a lot today. Place your bets.
 
I think Muni's have peaked for the time being. I have around 15% of my investible assets there and wish it were more but in the meantime have been using rollover money in T-bills and a few equity buys.
 
njhowie said:
Strong jobs numbers, Fed will continue raising rates (so they say), and yet the 10-year yield is off by a lot today. Place your bets.
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I stuck with my mechanical reinvestment strategy in my ladders. Putting maturing funds into the long end, which for me is 5-9 years. Everything I bought back in October to mid November was at yields you just can’t get today.

I think the short end, 2 year and less, will rise a bit, the long end not so much.
 
COcheesehead said:
I stuck with my mechanical reinvestment strategy in my ladders. Putting maturing funds into the long end, which for me is 5-9 years. Everything I bought back in October to mid November was at yields you just can’t get today.

I think the short end, 2 year and less, will rise a bit, the long end not so much.
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I'm seeing/doing the same. For me, long end is 10 to 20 years, even a sprinkle of 25 and 30 years. I'm no longer playing with the 100 year, sold the one issue I had yesterday for a good price. If I want to go longer term, the 30 year munis have better yields at this time and will be less volatile should rates go higher at the longer end of the yield curve. Short end, if I see a great CD on my secondary market screen I grab it. I can usually get small 5.5% to 6% lots once or twice a week for up to 2 year maturity.
 
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