Muni Bond (and Muni Bond Fund) Discussion

[Mr._Graybeard]

I'm laying back awhile -- I may need some ready cash to buy an adjoining piece of vacant land.

 

[COcheesehead]

I'm laying back awhile -- I may need some ready cash to buy an adjoining piece of vacant land.

We’re buying a lot next to us as well. They keep delaying closing. Every month that passes I earn about $1000 on the cash. They can take as long as they like now.

 

[COcheesehead]

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.

I am fully invested in my taxable account now with maturing funds happening mostly mid to late 2023.
I have some cash in IRAs, but feeling ambivalent about fixed income at the moment feeling if I invest short, I may miss a crater in equities that I would like to buy.
I am over funded in my ladders. They throw off way more than we spend right now.

 

[pb4uski]

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.

That's similar to my plan. I have a big slug maturing 1Q23 that I'll use about 1/2 to fill in my 3Q23-1Q24 rungs and at that point my quarterly rungs from 2Q23-4Q25 will all be full.

Then with maturities I'll start building quarterly rungs for 1Q-3Q26 and 1Q-3Q27... I already have rungs filled for 4Q26 and 4Q27.

Ultimate goal is to have ~18 quarterly rungs that are about the same size and have a rolling ladder instead of the bond fund that I used to have.

At some point I might make the rungs a little smaller but have more rungs (longer duration), but not for a while.

 

[njhowie]

I am fully invested in my taxable account now with maturing funds happening mostly mid to late 2023.
I have some cash in IRAs, but feeling ambivalent about fixed income at the moment feeling if I invest short, I may miss a crater in equities that I would like to buy.
I am over funded in my ladders. They throw off way more than we spend right now.

Ditto, ditto, ditto...I need to save all the income from the taxable accounts, and what DW brings home for a couple months so we don't get caught short if some unexpected expense pops up. She's maxed out on her 401k, so with the new higher limits, we'll see how much lower that makes her paychecks. I've been grabbing every really good muni I've found when I've had the cash. I need to back off a little, minimally in the taxable accounts.

 

[sengsational]

Reading here, I wonder how much I'm leaving on the table.

Back when rates were nothing in money markets, I bought an 18 month, 5 rung taxable muni ladder. This is for my mom, who doesn't need to worry about taxes. Just spent an hour grabbing the best deals of that day. Then, after one matures, I just pop on the one time, search the long end, and buy the best deal I find. Done. Is there reason to justify many hours of checking and re-checking the available issues, or is taking whatever is available at a random time sufficient?

 

[njhowie]

Reading here, I wonder how much I'm leaving on the table.

Back when rates were nothing in money markets, I bought an 18 month, 5 rung taxable muni ladder. This is for my mom, who doesn't need to worry about taxes. Just spent an hour grabbing the best deals of that day. Then, after one matures, I just pop on the one time, search the long end, and buy the best deal I find. Done. Is there reason to justify many hours of checking and re-checking the available issues, or is taking whatever is available at a random time sufficient?

For mom, your approach is fine. Again, from where we've been over the past ten years, it's all good. Don't stress about possibly leaving tenths on the table. When rates were at 1% and lower, sure, a tenth was meaningful. At 4%, it's almost meaningless.

 

[COcheesehead]

Reading here, I wonder how much I'm leaving on the table.

Back when rates were nothing in money markets, I bought an 18 month, 5 rung taxable muni ladder. This is for my mom, who doesn't need to worry about taxes. Just spent an hour grabbing the best deals of that day. Then, after one matures, I just pop on the one time, search the long end, and buy the best deal I find. Done. Is there reason to justify many hours of checking and re-checking the available issues, or is taking whatever is available at a random time sufficient?

At a specific duration say five years or so, there isn’t much yield variation within the top two to three bonds. Where I have found the yield difference more dramatic is across bond categories. Taxable bonds both agency and corporate have been paying more than munis - even when taxation is considered. I found myself buying more from those categories as of late.

 

[pb4uski]

Reading here, I wonder how much I'm leaving on the table.

Back when rates were nothing in money markets, I bought an 18 month, 5 rung taxable muni ladder. This is for my mom, who doesn't need to worry about taxes. Just spent an hour grabbing the best deals of that day. Then, after one matures, I just pop on the one time, search the long end, and buy the best deal I find. Done. Is there reason to justify many hours of checking and re-checking the available issues, or is taking whatever is available at a random time sufficient?

I'm hoping to get to where you are for your Mom soon. With maturities in the first half of 2022 I should be able to fill out a ladder with equal rungs that will mature quarterly for 4-1/2 years... from 3Q2023 to 4Q27.

Unless something unusual comes about we won't need that money for a while so each quarter as bonds mature I'll buy a replacement bond at the end of the ladder, adding another rung to my ladder to replace the rung that matured... a rolling bond ladder. But my ladder isn't munis but CDs, USTs or GSE bonds... generally whatevr was highest yielding at the time. Overall yield is a 5.2%.

 

[sengsational]

Thanks, all, for the thoughts. At the time of the original build, munis were paying the best, I think. I suppose I could check CD's and treasury rates as the munis mature, but I don't want to have to open a discussion about credit risk, no matter how small, so probably won't delve into corporate bonds for her.

 

[pdxgal]

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.

Your comment made me flash back to my mom's situation about 15 years ago when our investment advisor convinced my mom to sell most of her remaining Chevron stock. It was a large part of her portfolio. Had been in the family since the 1920's! Thankfully we also dumped her PG&E preferred stock (also bought in the 20's) around the same time, not long before a gas explosion in their lines killed 8 people, they were found liable for several apocalyptic forest fires, etc. Felt like we dodged a bullet on both counts, getting out while the getting was good.

 

[pb4uski]

Thanks, all, for the thoughts. At the time of the original build, munis were paying the best, I think. I suppose I could check CD's and treasury rates as the munis mature, but I don't want to have to open a discussion about credit risk, no matter how small, so probably won't delve into corporate bonds for her.

How about GSE bonds? Not full, faith and credit but usually Aaa, better than most minis and a tad more yield than CDs and USTs... but usually callable.

 

[sengsational]

I might be able to say a GSE issue is a fit for the project. Next round, I'll check the rate advantage.

 

[njhowie]

Gundlach Says Listen to Bond Market Rather Than Fed on Rates

https://finance.yahoo.com/news/gundlach-says-listen-bond-market-220343912.html

My 40 plus years of experience in finance strongly recommends that investors should look at what the market says over what the Fed says

He also drew attention to the inversion of the Treasury yield curve, which have successfully predicted economic slumps in the past. Inverted yield curves have always led to recession in relatively short order, he said, adding that “there is tremendous upside in many bond strategies.”

Gundlach’s comments on the Fed echo remarks he made late last week on Twitter in which he said “There is no way the Fed is going to 5%. The Fed is not in control. The Bond Market is in control.”

 

[njhowie]

10-year treasury yield cratering again today.

 

[MercyMe]

I've been out of Vanguard's intermediate-term muni fund (VWIUX/VWITX) for a good while now. Does anyone think it would be a mistake to DCA back in to it?

 

[aja8888]

I've been out of Vanguard's intermediate-term muni fund (VWIUX/VWITX) for a good while now. Does anyone think it would be a mistake to DCA back in to it?

If interest rates are going to start dropping, the NAV of muni bond funds should increase. That's a good thing if you buy in while the NAV is down.

 

[COcheesehead]

If they go up…
NAV will drop more though.

 

[aja8888]

If they go up…
NAV will drop more though.

Exactly, it's a casino out there.

 

[jazz4cash]

I have come to understand how weak the pricing mechanism is for these thinly traded bonds when there is frequently no bid. As a holder of individual bonds, it’s easy to ignore. If I’m holding a bond fund I have one eye on the NAV and the other on my fellow fund holder and wondering if I need to race to beat him out the door.

 

[COcheesehead]

I have come to understand how weak the pricing mechanism is for these thinly traded bonds when there is frequently no bid. As a holder of individual bonds, it’s easy to ignore. If I’m holding a bond fund I have one eye on the NAV and the other on my fellow fund holder and wondering if I need to race to beat him out the door.

Bond funds are not bonds and I think many people learned that lesson recently.

 

[njhowie]

10-year at 3.375% at the moment.

 

[COcheesehead]

Interesting tidbit. I run a muni screen of my state specific bonds a couple times a week. I usually get about 1200 - 1500 results. Today - 700. Hmmmmm.

 

[njhowie]

Interesting tidbit. I run a muni screen of my state specific bonds a couple times a week. I usually get about 1200 - 1500 results. Today - 700. Hmmmmm.

My saved queries have also declined in resulting bonds over the past few weeks. Yields are way down.

 

[COcheesehead]

My saved queries have also declined in resulting bonds over the past few weeks. Yields are way down.

The yield change has been evident. I wasn’t aware of the low inventory though. I suppose they go hand in hand. People buying.