We are entering a "Golden Period" for fixed income investing

[Freedom56]

I'm still trying to understand these resale treasuries/bonds
Won't this example actually pay 1 7/8% as that is the coupon rate, and I can buy it today at $58 6/32,
hold it until 2/15/2051 (29 yrs) and be repaid $100 ?
All of which very roughly works out to 3.32% (but largely paid at the end).

There is no make up the difference to the seller type of thing is there ?

There is no make up the difference to the seller. Only a fund would be dumb enough to lock 30 years at such a low yield and now be forced to sell it at a huge loss.

 

[Freedom56]

Fidelity finally has the Goldman Sachs 5 year 6.75% note.

I have a BB- rated 6.75% note being called one year early on 10/26/22 . It's a no-brainer to replace it with this one.

 

[Montecfo]

Federal Home Loan Bank due 10-28-27 callable. YTW 6.9%.
CUSIP 3130ATSB4

Does not show rating but looks same/similar to CUSIP 3130ATQ75 due one day before at 5.6% YTW. Something not right here or I am missing something.

 

[Freedom56]

Federal Home Loan Bank due 10-28-27 callable. YTW 6.9%.
CUSIP 3130ATSB4

Does not show rating but looks same/similar to CUSIP 3130ATQ75 due one day before at 5.6% YTW. Something not right here or I am missing something.

The maturity is in 2037 not 2027.

 

[dreamchaser]

Etrade shows 3130ATSB4 with maturity date of 10/28/2027, YTW 6.924%. I can’t find the GS 5 YR, 6.75% on etrade…might be user error, still searching.

 

[Montecfo]

The data I posted was from E*Trade. It looks like a possible error at E*Trade..it still says due 4-28-27.

 

[NW-Bound]

For what it's worth, Schwab says "Federal Home Loan Bks 3130ATSB4 Coupon 6.9 Maturity 10/28/2037 Callable".

 

[Montecfo]

For what it's worth, Schwab says "Federal Home Loan Bks 3130ATSB4 Coupon 6.9 Maturity 10/28/2037 Callable".

I wonder what E-Trade's liability is for error?

 

[lawman]

Fidelity finally has the Goldman Sachs 5 year 6.75% note.

I have a BB- rated 6.75% note being called one year early on 10/26/22 . It's a no-brainer to replace it with this one.

Schwab has it too...Is Goldman Sachs in better or worse shape than J.P.Morgan?

 

[gayl]

FWIW I don't know fixed investments but I understand I'm ignorant. Here's my question: I sold 2000sh of PWZ* @ 23.17 on 9/28/22 & bought 105k -> 3% CD. It matures 11/3/22 & I'm thinking of repurchasing 2000sh of PWZ now at 22.71. And the rest into another 1 month CD bc I don't know what to do. Am I as foolish as I feel?

*As a Californian the PWZ monthly dividends were never taxed

 

[Freedom56]

Schwab has it too...Is Goldman Sachs in better or worse shape than J.P.Morgan?

Well JP Morgan earned $9.8 billion in this quarter and Goldman Sachs earned $3.3 billion. Both are strong but JP Morgan is a much larger bank. I own notes from both banks and placed an order for the 6.75% Goldman Sachs.

Just keep in mind that with two thirds of this country being financially illiterate, these banks will loan money to their clients at far higher rates than the 6.75% they will be paying you.

 

[COcheesehead]

Fidelity finally has the Goldman Sachs 5 year 6.75% note.

I have a BB- rated 6.75% note being called one year early on 10/26/22 . It's a no-brainer to replace it with this one.

Put in an order at Fidelity today.

 

[DJRR]

Right, TIPS held to maturity have no market risk, same as Freedom56's portfolio because he plans to hold everything to maturity.

This is not true. You mean you have no default risk because it is issued by the US government. Everything has market risk. Next month you will be able to buy a 10 yr UST bond at 5%. If the market expects 3% inflation your 1% real TIP is worth less if you have to sell it. If you don't sell and the real yield on the bond is more than your TIP then you have lost money in opportunity cost and have less money than you could have. You also paid tax on income not received (if taxable account) and did not reinvest the coupons at a higher rate. It is math, interest rate up = price down for all bonds. Not all bonds lose value in the same amount (depends on duration and cash flow) and some bonds have credit risk in addition to market risk.

These issues are magnified by bond funds because they have expenses and cannot 100% control when they buy and sell. It does not matter how good they are at picking bonds if their monthly cash flow is negative, they have to sell to meet redemptions. Bond funds have more market risk than individual bonds which is why we are recommending to hold the bonds directly. If you are afraid of credit risk buy Treasuries, if you are willing to take some credit risk for the extra spread then due your diligence, diversify, and stay out of industries that have historically had a lot of defaults due to the business cycle.

 

[daylatedollarshort]

This is not true. You mean you have no default risk because it is issued by the US government. Everything has market risk. Next month you will be able to buy a 10 yr UST bond at 5%. If the market expects 3% inflation your 1% real TIP is worth less if you have to sell it. If you don't sell and the real yield on the bond is more than your TIP then you have lost money in opportunity cost and have less money than you could have. You also paid tax on income not received (if taxable account) and did not reinvest the coupons at a higher rate. It is math, interest rate up = price down for all bonds. Not all bonds lose value in the same amount (depends on duration and cash flow) and some bonds have credit risk in addition to market risk.

These issues are magnified by bond funds because they have expenses and cannot 100% control when they buy and sell. It does not matter how good they are at picking bonds if their monthly cash flow is negative, they have to sell to meet redemptions. Bond funds have more market risk than individual bonds which is why we are recommending to hold the bonds directly. If you are afraid of credit risk buy Treasuries, if you are willing to take some credit risk for the extra spread then due your diligence, diversify, and stay out of industries that have historically had a lot of defaults due to the business cycle.

I posted what is in The Bond Book and the Fidelity web site on market risk and individual bonds already. Maybe you can take it up with The Bond Book author and the Fidelity bond group and get them to correct the book and their web site, respectively, since they must have it all wrong.

ETA: And don't forget to contact Investopedia, too: "If you buy a bond and hold it until maturity, market risk is not a factor because your principal investment will be returned in full at maturity." Or the St. Louis Fed, "Of course, market risk is not an issue for investors who hold bonds to maturity because the face value, not the market value, of the bond is received at maturity." And numerous other investment books and web sites.

 

[lawman]

Well JP Morgan earned $9.8 billion in this quarter and Goldman Sachs earned $3.3 billion. Both are strong but JP Morgan is a much larger bank. I own notes from both banks and placed an order for the 6.75% Goldman Sachs.

Just keep in mind that with two thirds of this country being financially illiterate, these banks will loan money to their clients at far higher rates than the 6.75% they will be paying you.

Why do big banks sell bonds? What do they do with he money?

 

[Freedom56]

Why do big banks sell bonds? What do they do with he money?

They are raising liquidity for lending and hedging. The Fed, in addition to raising rates, is in quantitative tightening mode and shrinking the money supply at a rate of $95B per month.

 

[lordjust]

Put in an order at Fidelity today.

i put mine in this morning for this one as well. Just worried the rates are going to change significantly in the next couple of weeks and we may be better off waiting (me timing the market). oh well.. buy more in a couple of weeks i suppose.

I am really hating that i have to call in to put in limit orders for bonds with Schwab. its unbelievably time consuming.

 

[Sunset]

Well JP Morgan earned $9.8 billion in this quarter and Goldman Sachs earned $3.3 billion. Both are strong but JP Morgan is a much larger bank. I own notes from both banks and placed an order for the 6.75% Goldman Sachs.

...

I don't see this GS bond at Vanguard.

Do you consider this GS 6.75% Bond a good one at par value ?

 

[Freedom56]

I don't see this GS bond at Vanguard.

Do you consider this GS 6.75% Bond a good one at par value ?

Right now it's the best among new issues of high grade notes/bonds. For me it's a great replacement for a high yield note with a high grade note at the same coupon. The golden period creates these opportunities.

 

[pb4uski]

I understand why bond values are marked down when interest rates rise way above their coupon rates. It's elementary.

TIPS are supposed to increase in value with inflation. And with inflation at 8.2%, way above the 6% coupon rate of even the new bonds, why do TIPS get marked down?

My guess is because the discount rate goes up and the increase in the discount rate overwhelms the increased cash flows.

 

[Freedom56]

This guy clearly has not fully embraced the "golden period" with all his rambling. However, I am encouraged by the prospects of an extended "golden period" of fixed income investing.

 

[lordjust]

Right now it's the best among new issues of high grade notes/bonds. For me it's a great replacement for a high yield note with a high grade note at the same coupon. The golden period creates these opportunities.

freedom .. you may need to trademark that saying

 

[TheCaptain67]

Just saw a Goldman Sachs 10-year bond at Fidelity at 7.0%

CUSIP - 38150APU3

Issues on 10/27

 

[Freedom56]

Just saw a Goldman Sachs 10-year bond at Fidelity at 7.0%

CUSIP - 38150APU3

Issues on 10/27

Yes and it represents about a .75 spread to Goldman Sachs other notes on the secondary market.

 

[Born2Fish]

Just saw a Goldman Sachs 10-year bond at Fidelity at 7.0%

CUSIP - 38150APU3

Issues on 10/27

I am buying in my TDA IRA. I am seeing more of Goldman Sachs (GS) corporate notes (bonds) at higher rates (so far) vs. other banks.

I am interested in the 7.0% GS Note above, but already have 2.5 % of my total portfolio in GS bonds.

GS rating is A2/BBB+.

Toronto Dominion bank (Canada) is rated A1/A.

What limit do you have for max % of portfolio allocated to a single bank?

Would the difference in credit rating between GS and TD banks influence your percent allocation?