Individual bonds

[beachfire]

What are thoughts on investing in a bond ladder made up of a mix of individual govt and investment grade bonds. Need to put about $1.5 million into fixed income at some point over the 12-18 months. I like the increased principal certainty that comes with owning individual bonds vs a fund (I understand the issuer risk, but feel comfortable working through that).

I have not bought individual bonds before. Has anyone used the bond ladder tool offered by fidelity (only available if you have a fidelity brokerage account). It looks kinda nice as it allows you to put in various criteria (govt, corp, muni, ratings, term, yield, how long of a ladder you want, maturity frequency, etc) and it brings forward specific bonds that meet your criteria to build out a ladder.

Any other thoughts or advice on how to best build out fixed income portfolio? How do I get visibility into how much brokers are marking up bonds that I may purchase?

Thanks for any thoughts.

 

[COcheesehead]

I use a self constructed muni bond ladder at Fidelity. About 140 individual issues. My goal is strictly income from it to bridge to social security. I like that I do not incur any capital loss if I hold to maturity. It has been a nice foundational piece in my portfolio and completely funds, actually overfunds, our retirement budget.
Bonds have become intuitive to me, but there are a lot of nuances. Fidelity will construct a bond ladder for at no additional charge. I suggest having a conversation with them first.

 

[Freedom56]

I personally would not use any ladder tools offered by Fidelity or have Fidelity choose bonds for you. The bid and ask yield ranges are generally too high. You will most likely end up overpaying for bonds that Fidelity wants to dump. I have been investing in fixed income for over 30 years (individual corporate bonds, CDs, treasuries, municipal bonds, and preferred stock). My primary objectives are preservation and growth of capital with a regular income though coupon payments. The coupon payments are my income stream along with my private pension. Whatever remains after covering taxes and expenses is reinvested. I also trade CEFs when the opportunity arises. I never buy passive bond or preferred stock funds. They are just a bad idea. Buying individual bonds are no different from buying individual stocks except you want stable profitable companies with good cash flow and interest rate coverage. Remember a bond is a contractual obligation the issuer has to the holder to pay fixed coupon payments. Don't be fooled by bond ratings. I own many BB and BB+ rated corporate bonds from profitable companies like Seagate Technology, Western Digital, Level 3, that are far safer than many investment grade rated issues from companies that barely earn income. Credit default swaps (the cost of insuring the debt) from default is a better indication of safety than bond ratings. The best approach is to time your purchases such that you are buying when everyone is selling. Use limit orders only. During times of panic selling, I have seen bid and ask spreads as high as 15-18%. Pick companies you know and that are profitable. In a rising rate environment, buy short duration fixed income (2-3 years). You can buy longer duration fixed income issues about 3 months before the last interest rate hike. With at least 6 more rate hikes on the way, many low coupon investment grade issues from banks are going to get crushed. You can use that opportunity to pick up issues from companies like JP Morgan, Bank of America, Capitol One Financial, and others at yields far better than what funds were paying 6 months ago. 2022 will be a great year to build up an individual bond ladder. Start by looking for issues of companies you know with maturities in 2023, 2024, all the way up to 2026. Later in the year, buy longer duration bonds out to 2032.

 

[njhowie]

The Fidelity bond ladder tool is a good starting point - play with it and get a feel for how it works and what it will give you. You can play with the parameters and set up multiple scenarios and analyze the results if you decide to look deeper.

You'll need to decide how the investment will occur - buy $1.5 million immediately, or over time...maybe ~$100k monthly for a year. In a rising rate environment, which we now have, the latter is likely going to produce a better result.

As far as how much the brokers are making? Fidelity is getting $1/bond ($1 per $1000 of par value) commission. So, if you do use the entire $1.5 million to purchase as many bonds as you can, you'll pay roughly $1500 in commission. Now, when buying the bonds, you'll need to decide if you'll pay the current offer (equivalent of market buy in stock terms), or play cat and mouse with the dealer and try to get a lower price (equivalent of limit buy in stock terms). Fidelity provides sufficient capabilities to provide very good price transparency. In the municipal bond space, it is generally very easy to see how much the dealer paid for the bonds being offered for sale. In the corporate bond space, depending on how much volume there is, it may be less obvious, but you can still see the prices of recent purchases.

I think similarly to COcheesehead about most things.

 

[Out-to-Lunch]

You might take a look at the target-maturity funds from Blackrock ( iShares: https://www.ishares.com/us/strategies/bond-etfs/build-better-bond-ladders ) or Invesco (Bulletshares: https://www.invesco.com/us/en/solutions/invesco-etfs/bulletshares-fixed-income-etfs.html ). These would help with the diversification issue.

 

[pb4uski]

I personally would not use any ladder tools offered by Fidelity or have Fidelity choose bonds for you. ...

Question for Freedom56 but also COcheesehead and njowie.... what tools do you use to search for bonds... I'm familiar with screeners for stocks but are there similiar screener tools for bonds?

I have accounts with Vanguard, Schwab and Fidelity. I would probably be looking to invest in 5-10 year maturities of investment grade or better (or perhaps a notch or two below investment grade) and would intend to hold to maturity.

 

[njhowie]

Question for Freedom56 but also COcheesehead and njowie.... what tools do you use to search for bonds... I'm familiar with screeners for stocks but are there similiar screener tools for bonds?

I have accounts with Vanguard, Schwab and Fidelity. I would probably be looking to invest in 5-10 year maturities of investment grade or better (or perhaps a notch or two below investment grade) and would intend to hold to maturity.

Yes, Fidelity has screeners. For municipal bonds, go here:
https://tinyurl.com/2p8d663m

For corporates, go here:
https://tinyurl.com/2p82a5j7

 

[COcheesehead]

In response to Freedom, you know exactly what the yield is at the time of purchase and that includes all the costs including mark up and commission, so you can compare that to market rates elsewhere, so as far as being taken by Fidelity - hogwash.

I’m response to Pb4uski, I use a Fidelity bond screen tool with parameters that I have set in regard to quality, yield and duration. I run it almost daily, though I only buy bonds occasionally.

I have a bunch maturing in June, so I will ramp up my purchases then and it seems to be getting to be much better time to buy now than it was in the recent past. Yields are up nicely.

 

[Freedom56]

Just to be clear, yes Fidelity charges a markup of $1 per bond and others such as Schwab, TD Ameritrade do not. Fidelity and others make their money from the bid/ask spreads. this is why I use lower limit orders and save on average 2-3% on bonds. I recently purchased $200K in 2025 5.375% notes at a price of $98.08 from Fidelity when their bid price was $99.20 and their ask price $100.40 through their online bond trade entry. FINRA trace data indicated trades below $99 so the Fidelity $1 commission bond and bid/ask prices were meaningless. I just placed a limit order and it was eventually filled after three trading days of attempts. A 2% savings on a $200K trade is $4000. The $200 markup I paid is a mirage masking what it could have cost me had I just bought at the ask price or even at the bid price. So 2% of $1.5M is $30K which buys a lot of nice toys. Fidelity bid/ask prices are often disconnected from market prices as bond trades are very illiquid and don't go through central exchanges like stock trades.

 

[Freedom56]

Question for Freedom56 but also COcheesehead and njowie.... what tools do you use to search for bonds... I'm familiar with screeners for stocks but are there similiar screener tools for bonds?

I have accounts with Vanguard, Schwab and Fidelity. I would probably be looking to invest in 5-10 year maturities of investment grade or better (or perhaps a notch or two below investment grade) and would intend to hold to maturity.

I use the FINRA site to screen corporate bonds. You can get your bond news from the "Market at a Glance" tab. Use the "search' tab to find corporate bonds. There is also and advanced search option.


https://finra-markets.morningstar.com/BondCenter/


I use company stock research to look at the financials of a particular company and the 10K and 10Q reports. For example, say that I was interested in Capital One Financial 2025 4.25% notes rated BBB.

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C754079&symbol=COF4627793

You can see clearly for the chart and price indicated that it is selling off and the yield is still a paltry 3.352% as of 3/22/22. This same issue traded down to $92 in March 2020. Given that a 2 year treasury is current yielding over 2% it doesn't take a big leap of faith to realize that this note will eventually drop below par as rate continue to rise and may even test the previous low giving a much more attractive yield than blindly locking in at current yield.

 

[beachfire]

I personally would not use any ladder tools offered by Fidelity or have Fidelity choose bonds for you. The bid and ask yield ranges are generally too high. You will most likely end up overpaying for bonds that Fidelity wants to dump. I have been investing in fixed income for over 30 years (individual corporate bonds, CDs, treasuries, municipal bonds, and preferred stock). My primary objectives are preservation and growth of capital with a regular income though coupon payments. The coupon payments are my income stream along with my private pension. Whatever remains after covering taxes and expenses is reinvested. I also trade CEFs when the opportunity arises. I never buy passive bond or preferred stock funds. They are just a bad idea. Buying individual bonds are no different from buying individual stocks except you want stable profitable companies with good cash flow and interest rate coverage. Remember a bond is a contractual obligation the issuer has to the holder to pay fixed coupon payments. Don't be fooled by bond ratings. I own many BB and BB+ rated corporate bonds from profitable companies like Seagate Technology, Western Digital, Level 3, that are far safer than many investment grade rated issues from companies that barely earn income. Credit default swaps (the cost of insuring the debt) from default is a better indication of safety than bond ratings. The best approach is to time your purchases such that you are buying when everyone is selling. Use limit orders only. During times of panic selling, I have seen bid and ask spreads as high as 15-18%. Pick companies you know and that are profitable. In a rising rate environment, buy short duration fixed income (2-3 years). You can buy longer duration fixed income issues about 3 months before the last interest rate hike. With at least 6 more rate hikes on the way, many low coupon investment grade issues from banks are going to get crushed. You can use that opportunity to pick up issues from companies like JP Morgan, Bank of America, Capitol One Financial, and others at yields far better than what funds were paying 6 months ago. 2022 will be a great year to build up an individual bond ladder. Start by looking for issues of companies you know with maturities in 2023, 2024, all the way up to 2026. Later in the year, buy longer duration bonds out to 2032.

Thanks so much for this. Great and helpful information. Do I need to have brokerage accounts with multiple firms in order to access their bond inventories OR can I just do limit orders through my current account with Merrill and I will have access to the full set of bonds available for sale on the market?

 

[COcheesehead]

Just to be clear, yes Fidelity charges a markup of $1 per bond and others such as Schwab, TD Ameritrade do not. Fidelity and others make their money from the bid/ask spreads. this is why I use lower limit orders and save on average 2-3% on bonds. I recently purchased $200K in 2025 5.375% notes at a price of $98.08 from Fidelity when their bid price was $99.20 and their ask price $100.40 through their online bond trade entry. FINRA trace data indicated trades below $99 so the Fidelity $1 commission bond and bid/ask prices were meaningless. I just placed a limit order and it was eventually filled after three trading days of attempts. A 2% savings on a $200K trade is $4000. The $200 markup I paid is a mirage masking what it could have cost me had I just bought at the ask price or even at the bid price. So 2% of $1.5M is $30K which buys a lot of nice toys. Fidelity bid/ask prices are often disconnected from market prices as bond trades are very illiquid and don't go through central exchanges like stock trades.

The market for corporates and muni’s are different. NJHowie I know every once in a while will have luck with limit orders, but the market is so thin for muni’s I never have had a fill on a limit order. I buy based on a reasonable yield that fits my ladder.
The failure rate on corporates is also high. Across all quality levels corporates fail at almost 10% while muni’s fail at .16% according to Moodys. See the chart attached.

 

[Freedom56]

Thanks so much for this. Great and helpful information. Do I need to have brokerage accounts with multiple firms in order to access their bond inventories OR can I just do limit orders through my current account with Merrill and I will have access to the full set of bonds available for sale on the market?

I closed my Merrill account after I retired and stopped receiving my stock grants. That was the only reason I had an account at Merrill. If you use Merrill Edge, the bond commission structure is the same as Fidelity. However, with bond trading, what you pay for the bond is more important that the $1 per bond commission. What is more important is that you are able to place limit orders online without calling the bond trading desk by phone. Having multiple accounts will certainly give you access to more inventory but you can call the bond trading desk at your brokerage to access other issues if you don't see it in inventory. This is why I use FINRA as my primary search tool for bonds/notes. My plan this year is to invest $1.4 million that I have sitting in money market savings accounts currently earning about 0.5%. I have already invested $200K of that during the past two weeks. With $1.5M to invest you should be able to earn about $70K-90K in income annually with investment grade bonds/notes if you prudently time your purchases and ease into a bond ladder. Right now I am only looking at maturities up to 2025. Here are some investment grade notes that I am tracking and will buy when they drop well below par (and they will) making their yields more attractive. There are many more that I am tracking. As rates continue to rise, finding attractive yields will be like shooting fish in a barrel as bond funds start liquidating after investors head for the exits. The low coupon investment grade notes (coupons lower than 2%) are getting hit hard right now but funds will be forced to sell their higher coupon notes as the year progresses. This will be a horrific year for bond fund investors but a great year for individual bond investors who will be able to lock in investments at higher yields.

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C642369&symbol=ALLY4311981

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C893889&symbol=ALLY4974312

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C754079&symbol=COF4627793

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C614653&symbol=EBAY4147283

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C637534&symbol=BAC4031006

 

[aja8888]

I closed my Merrill account after I retired and stopped receiving my stock grants. That was the only reason I had an account at Merrill. If you use Merrill Edge, the bond commission structure is the same as Fidelity. However, with bond trading, what you pay for the bond is more important that the $1 per bond commission. What is more important is that you are able to place limit orders online without calling the bond trading desk by phone. Having multiple accounts will certainly give you access to more inventory but you can call the bond trading desk at your brokerage to access other issues if you don't see it in inventory. This is why I use FINRA as my primary search tool for bonds/notes. My plan this year is to invest $1.4 million that I have sitting in money market savings accounts currently earning about 0.5%. I have already invested $200K of that during the past two weeks. With $1.5M to invest you should be able to earn about $70K-90K in income annually with investment grade bonds/notes if you prudently time your purchases and ease into a bond ladder. Right now I am only looking at maturities up to 2025. Here are some investment grade notes that I am tracking and will buy when they drop well below par (and they will) making their yields more attractive. There are many more that I am tracking. As rates continue to rise, finding attractive yields will be like shooting fish in a barrel as bond funds start liquidating after investors head for the exits. The low coupon investment grade notes (coupons lower than 2%) are getting hit hard right now but funds will be forced to sell their higher coupon notes as the year progresses. This will be a horrific year for bond fund investors but a great year for individual bond investors who will be able to lock in investments at higher yields.

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C642369&symbol=ALLY4311981

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C893889&symbol=ALLY4974312

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C754079&symbol=COF4627793

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C614653&symbol=EBAY4147283

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C637534&symbol=BAC4031006

Thanks, seeing my Schwab IRA is half full of cash after selling all my preferreds over the last 12 months, I am going to load up on corporate bonds like the above. In my taxable account, I plan to fill the cash bucket with muni's.

 

[Freedom56]

Thanks, seeing my Schwab IRA is half full of cash after selling all my preferreds over the last 12 months, I am going to load up on corporate bonds like the above. In my taxable account, I plan to fill the cash bucket with muni's.

I had many of my notes mature in 2021 and early 2022 plus my recurring coupon payments from my portfolio which resulted in a sizeable cash position. I will post my complete list of corporate bonds (investment and high yield) that I plan to buy along with investment grade preferred stocks and bond, preferred and muni bond CEFs. My objective is to add about $80-110K annually in coupon payments on a $1.4M investment with a combination of investment grade and high yield bonds/notes and preferred stocks.

 

[aja8888]

I had many of my notes mature in 2021 and early 2022 plus my recurring coupon payments from my portfolio which resulted in a sizeable cash position. I will post my complete list of corporate bonds (investment and high yield) that I plan to buy along with investment grade preferred stocks and bond, preferred and muni bond CEFs. My objective is to add about $80-110K annually in coupon payments on a $1.4M investment with a combination of investment grade and high yield bonds/notes and preferred stocks.

Thanks, that would be great.

 

[beachfire]

I had many of my notes mature in 2021 and early 2022 plus my recurring coupon payments from my portfolio which resulted in a sizeable cash position. I will post my complete list of corporate bonds (investment and high yield) that I plan to buy along with investment grade preferred stocks and bond, preferred and muni bond CEFs. My objective is to add about $80-110K annually in coupon payments on a $1.4M investment with a combination of investment grade and high yield bonds/notes and preferred stocks.

This is enormously helpful! I have everything already wired up with BAC and Merrill, it serves me well for what I have used it for. But, perhaps I take the $1.5 and open a brokerage account for fixed income purposes somewhere else. As you mention being able to call the bond trading desk and being able to enter limit orders online as critical, is the a brokerage firm you might suggest that has both of those capabilities? I need to read through your posts and the others a couple more times to make sure I am clear on the suggestions… it would be super helpful if you would be willing to share your watchlist. Thanks

 

[Freedom56]

This is enormously helpful! I have everything already wired up with BAC and Merrill, it serves me well for what I have used it for. But, perhaps I take the $1.5 and open a brokerage account for fixed income purposes somewhere else. As you mention being able to call the bond trading desk and being able to enter limit orders online as critical, is the a brokerage firm you might suggest that has both of those capabilities? I need to read through your posts and the others a couple more times to make sure I am clear on the suggestions… it would be super helpful if you would be willing to share your watchlist. Thanks

The problem with Schwab is that you can't issue limit orders on corporate bonds/notes without calling the bond trading desk. TD Ameritrade has limited capability to do so. With Fidelity you can set limit orders within the upper and lower bands defined by their order book online. If there are no bids or asks, you have to call the bond desk. This is also true for TD Ameritrade and Schwab. Before moving your funds, look into what Merrill Lynch has to offer in terms of fixed income trading. I use Fidelity the most because they offer the most bond funds and consequently the most inventory. I will post my watch list shortly. Be aware that high coupon investment grade bonds/notes are all but gone (called or matured). As for diversification, I stick to stable sectors such as financials, telecom, technology, pharma, and biotechnology and only companies that are profitable. I completely avoid energy, retail, industrials, and mining where the bulk of the defaults have occurred.

 

[Freedom56]

The following is a list of investment grade and high yield corporate notes that I am tracking to add to my portfolio. I am currently only lookin at corporate notes with 2-3 year maturities at this time. CD rates are still too low to consider. Investment grade preferred stocks are still overpriced with their yields far too low given where rates are headed in the near term. I have included links to the FINRA site for each. You can create your own watchlist by clicking on the link to each note and selecting "add to watch list" on the FINRA site. These corporate notes have an extremely low probability of default and all are from profitable companies.

Investment Grade 2024 - Buy below par and when their YTM is > 5%

Wells Fargo 4.48% 1/16/2024

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C606963&symbol=WFC4097730

Citibank 3.65% 1/23/2024

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=FC4788607&symbol=C4788607

PNC Financial 3.9% 4/24/2024

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C663202&symbol=PNC4119535

PNC Financial 3.5% 1/23/2024

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C803343&symbol=PNC4789355

Verizon 3.5% 11/1/2024

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C621371&symbol=VZ4176696


Investment Grade 2025 - Buy below par and when their YTM is > 5.75%

Ally Financial 5.75% 11/25/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C642369&symbol=ALLY4311981

Ally Financial 5.8% 5/1/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C893889&symbol=ALLY4974312

Capital One Financial 4.2% 10/25/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C641381&symbol=COF4305361

Capitol One Financial 4.25% 4/30/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C754079&symbol=COF4627793

Discover Financial Services 4% 11/15/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C718660&symbol=DFS4310830

Barclays 3.65% 3/16/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C627453&symbol=BCS4220930

Citigroup Inc 3.875% 3/26/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C627711&symbol=C4224375

HCA Inc 5.25% 4/15/2025 First Lien Note

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C619159&symbol=HCA4172839

Broadcom Inc 4.7% 4/15/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C919169&symbol=AVGO5015228

Bank of America 3.95% 4/21/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C629649&symbol=BAC4234735

Charles Schwab 3.85% 5/21/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C758701&symbol=SCHW4634695

Goldman Sachs Group 3.75% 5/22/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C702998&symbol=GS4248965

Intel Corp 3.7% 7/29/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C635939&symbol=INTC4270896

Applied materials Inc 3.9% 10/1/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C639839&symbol=AMAT4291221

Lam Research Corp 3/15/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C627327&symbol=LRCX4219917


High Yield 2024 - Buy below par and when their YTM is > 6%

Seagate Technology 4.875% 3/1/2024

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C736353&symbol=WDC4594056

Centurylink 7.5% 4/1/2024

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C649205&symbol=CTL4346902

Netflix 5.75% 3/1/2024

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C626117&symbol=NFLX4219004

High Yield 2025 - Buy below par and when the YTM > 6.5%

Seagate Technology 4.75% 1/1/2025

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C635815&symbol=STX4269186

 

[aja8888]

Freedom56, thanks for the list and links! Much appreciated!

I'll start looking at these tomorrow.

 

[COcheesehead]

Having a wish list for bonds is nice, but… they may never come to market.

I evaluate/act on what can actually be bought at the time. Gems come and go and can be bought if you’re nimble.

 

[Freedom56]

This is no wish list. Those notes trade every day. Buying corporate bonds/notes is not too different from buying a stock. You have to have an idea of what to buy in advance. When bond funds are in a liquidation mode, the opportunities come fast and with a watchlist with links to trace data, you can monitor any opportunity that pops up. With preferred stocks and CEFs I setup price triggers and receive a text message when the preferred stock or CEF drops below my trigger threshold.

 

[coveredbridge]

Just to be clear, yes Fidelity charges a markup of $1 per bond and others such as Schwab, TD Ameritrade do not. Fidelity and others make their money from the bid/ask spreads. this is why I use lower limit orders and save on average 2-3% on bonds. I recently purchased $200K in 2025 5.375% notes at a price of $98.08 from Fidelity when their bid price was $99.20 and their ask price $100.40 through their online bond trade entry. FINRA trace data indicated trades below $99 so the Fidelity $1 commission bond and bid/ask prices were meaningless. I just placed a limit order and it was eventually filled after three trading days of attempts. A 2% savings on a $200K trade is $4000. The $200 markup I paid is a mirage masking what it could have cost me had I just bought at the ask price or even at the bid price. So 2% of $1.5M is $30K which buys a lot of nice toys. Fidelity bid/ask prices are often disconnected from market prices as bond trades are very illiquid and don't go through central exchanges like stock trades.

You bought 5.375% 3 yr notes in size at a 2 point discount? That looks like a heckuva deal even for high yield? Who was the issuer if you don't mind my asking?

 

[Freedom56]

You bought 5.375% 3 yr notes in size at a 2 point discount? That looks like a heckuva deal even for high yield? Who was the issuer if you don't mind my asking?

I bought these notes from Level 3. The bid and ask on Fidelity was completely divergent from the recent trades reported by FINRA. So I placed limit order and it was eventually filled.

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C644939&symbol=CTL4326891

I bought them at the beginning of last week and have an effective YTM of just over 6%. Some people did even better. They can call the note at $100.90 this May but I speculated that they would not. The company said that they would continue to buy back debt which they have been doing and they expect $7 billion in net proceeds from a sale a wireline division and the Latin America internet backbone. The sale is supposed to close at the end of Q2.

 

[njhowie]

With Fidelity you can set limit orders within the upper and lower bands defined by their order book online.

There is a way to get around their restriction and set your bid to whatever you want, at least as far as the muni space goes. It's likely the same for corporates.

Drop me a note if interested and I can fill you in.