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

[COcheesehead]

My ladder is currently invested, but as I have previously mentioned, about 50% is maturing here in early 2023. Good or bad, that was the time I planned to start laddering out longer term (up to 10 years). If I recall, you are mostly invested in bonds as opposed to equities? In my case, I am still almost 70% in equities split around 55/45 (after tax/tax deferred accounts), although I did start Roth conversions this year. Getting tax strategic with my account types and incorporating munis is next on my agenda. As someone who will lean on their equities for long term growth and is using their bond ladder for predictability, I am just trying to underwrite the appropriate risk and diversification profile for my bond allocation.

My asset allocation is driven by a number of portfolio modeling tools including FireCalc. I am overfunded for my goals. I still have seven figures in equities for long, long term needs. My ladder was built to fund a bridge to social security and now over funds that goal by a lot.

If you are looking for predictability than you have to look towards non callable or call protected assets. Frankly I never worried about a call. Even when rates were lower, I always found yield. I manage my ladder more by how much cashflow it generates with its yield percentage being secondary.

 

[lordjust]

02006DK34

BBB-

6.100 12/15/2025

Next Call Date 06/15/2023

Ally Fin

 

[lordjust]

anyone have any thoughts on this one ?

105340AR4

https://finance.yahoo.com/news/brandywine-realty-trust-announces-closing-213800668.html

 

[lawman]

Can someone straighten me out on "settlement date" ? I thought settlement date was the date that orders are completed and paid for and the beginning of when an issue begins to pay interest..I have placed several orders that were paid for and appeared in my securities list long before the settlement date.

 

[perez99]

As someone who will lean on their equities for long term growth and is using their bond ladder for predictability, I am just trying to underwrite the appropriate risk and diversification profile for my bond allocation.

+1

Now that I dont want to rely on bond funds, I have the same doubts on the best approach to ladder. Bonds are simple, but somehow harder to incorporate in a coherent approach when compared to equities

 

[sengsational]

I was trying to lowball on 78014RJQ4, but I get the message:

• There is no displayed quote that will satisfy your order.
• If you're attempting to enter an order at the same yield as the displayed quote, confirm the quantity fulfills the dealer's quantity requirements.
• If you are attempting to enter a limit order at a yield other than the displayed yield, enter your order between 5.241 and 5.440.

Is this is like the annoying thing that used to be part of eBay, where they have an unpublished 'reserve price'? Don't waste my time!

 

[lordjust]

I was trying to lowball on 78014RJQ4, but I get the message:



Is this is like the annoying thing that used to be part of eBay, where they have an unpublished 'reserve price'? Don't waste my time!

ya those candian ones are tough to get.. nice though.. one can hope they pop back up with the 6%ers ... was that from fidelity ?

 

[sengsational]

ya those candian ones are tough to get.. nice though.. one can hope they pop back up with the 6%ers ... was that from fidelity ?

Yes, the quote was off of the Fidelity site. Should have mentioned that.

 

[lordjust]

Yes, the quote was off of the Fidelity site. Should have mentioned that.

i dont see how to buy it on fidelity but the citibank one may be an alternative for you

17330YNR7

 

[DawgMan]

+1

Now that I dont want to rely on bond funds, I have the same doubts on the best approach to ladder. Bonds are simple, but somehow harder to incorporate in a coherent approach when compared to equities

Well, in my case I am looking for predictability in my 10 yr bond ladder as my go-to for withdrawals when stocks are down. If stocks are up, I pull from equities and reload my bond ladder, If stocks are down, I ride my bond ladder until they come back. History says 10 yrs of bonds should offer plenty of defense in the event of a longer downturn. That said, I have other levers to pull if needed in a prolonged downturn. I still want the best return I can get on my bond $$, but want to limit my risk "within reason" since my equities are there to pull the sled. During the accumulation years, I held bond funds and viewed them more as a ballast. As a new retiree, the balance between predictability on 10 years worth of spend and letting the balance roll in the stock market appeals to both my conservative and greedy nature...

 

[Spock]

...
If you are looking for predictability than you have to look towards non callable or call protected assets. Frankly I never worried about a call. Even when rates were lower, I always found yield....

Maybe this needs it's own "non-golden period" thread, but given that non-callable bonds (I'm restricting to CD's, T's, GSEs) are pretty much made out of unobtainium right now, lots of rungs past 3 years in the ladders are callable.


Assuming these rungs are called and rates are back to the bad ol' days of 0.1% from not that long ago, where do you look or what barrel bottoms get scraped to refill these called rungs? What rates were you getting in the dark days and and at what rating?

 

[GravitySucks]

Well, in my case I am looking for predictability in my 10 yr bond ladder as my go-to for withdrawals when stocks are down. If stocks are up, I pull from equities and reload my bond ladder, If stocks are down, I ride my bond ladder until they come back. History says 10 yrs of bonds should offer plenty of defense in the event of a longer downturn. That said, I have other levers to pull if needed in a prolonged downturn. I still want the best return I can get on my bond $$, but want to limit my risk "within reason" since my equities are there to pull the sled. During the accumulation years, I held bond funds and viewed them more as a ballast. As a new retiree, the balance between predictability on 10 years worth of spend and letting the balance roll in the stock market appeals to both my conservative and greedy nature...

Its like looking in a rearview mirror. I was in the same place and had the same concerns as you.

When I retired I put all my FI in AGG. Then I built a bond ladder using iShare target date funds. Each year on my ladder is only large enough to meet essential expenses. After reconsidering what my bonds are for - keeping body and soul together in a long downturn - I moved from AGG to FUAMX (as well as some short term funds) for the higher quality and shorter duration. Since 2018 I have been rebalancing and reinvesting the matured target date funds into 1 - 3 year corporates. The target date funds weren't the best but until this year they did their duty.

Now that I've learned about TIPS and they're spinning off a tiny positive yield I'll be using them for my ladder. Can't think of anything safer and again it's only enough to cover essentials so the safety is, too me, more important than the earnings drag.

In my 401k I only had access to a few bond funds and I only had around 5% in bonds. Always thought the Bond portion of the portfolio would be the easy part. Turns out I spend more time and effort there than any other investment 'work'.

Good luck and try not to worry.

 

[jazz4cash]

MYGA’s are starting to look pretty good as an alternative right now. 5 yr@ 5.4% non callable w/ 5% free withdrawals from A-rated Americo but rates are dropping.

 

[youbet]

I timed nothing. It is just a discipline I've had for 20+ years.

Did you remain disciplined during the periods of very low bond yields and buy them anyway? I would have struggled with that.

 

[Freedom56]

The Wall Street bond market traders are fighting the Fed but in they end they will lose more of "other peoples money".

"In new economic projections released after the meeting, most Fed officials penciled in plans to raise the fed-funds rate to a peak level between 5% and 5.5% in 2023 and hold it there until some time in 2024."

"It’s like the new projections didn’t happen, quite honestly. And I’m surprised the market is shrugging it off so confidently,” said Mr. Ferridge. “The expectation is the economic data will be so poor” by the end of the first quarter “that the Fed will stop hiking.”

Fighting the Fed has been a losing strategy for these Wall Street bond traders since late 2021 though 2022. All they are doing is setting up for a third year of losses for the funds they are trading for. Money market funds should start yielding over 4% fairly soon and approach 5% by the end of 2023 if the Fed continues to its 5-5.25% Fed funds target.

https://www.wsj.com/articles/fed-ra...eases-likely-11671044561?mod=latest_headlines

 

[JoeWras]

Did you remain disciplined during the periods of very low bond yields and buy them anyway? I would have struggled with that.

Yes, but I slowed way down. Call it timing, or whatever, it just felt like when you are literally at 0.05%, it just didn't make sense to pile in. The money market was just as good and more flexible. I still kept some rungs just to not lose the discipline completely. And reminder, I'm talking treasuries, not corporates.

 

[John Galt III]

Maybe this needs it's own "non-golden period" thread, but given that non-callable bonds (I'm restricting to CD's, T's, GSEs) are pretty much made out of unobtainium right now, lots of rungs past 3 years in the ladders are callable.


Assuming these rungs are called and rates are back to the bad ol' days of 0.1% from not that long ago, where do you look or what barrel bottoms get scraped to refill these called rungs? What rates were you getting in the dark days and and at what rating?

That's my question, too. When does my 5 year, 4.85% callable CD get called? When rates drop to 4.84 % ? 4.6 %? 1.0 %? No answers out there, lol. Maybe it varies.

 

[Spock]

That's my question, too. When does my 5 year, 4.85% callable CD get called? When rates drop to 4.84 % ? 4.6 %? 1.0 %? No answers out there, lol. Maybe it varies.

The formula for calling bonds is up to each issuer so there is no way to forecast it. Issuers have to assess have rates fallen far enough to make it worth the expense of calling the bonds AND the costs of re-issuing new debt to replace them (assuming they still need the funds). And the new debt has to be raised first to pay off the old debt, but I assume the investment house handling the bond issues may loan them the $ for a fee.

It's kinda like the when to break a CD calculator on steroids.

What I want to explore is what kinds of toads I'm going to have to kiss to replace my called bonds. It will depend on whats available, so I'll start with what was available while rates were in the toilet.

 

[COcheesehead]

6% and 6%+ agency bonds are available again, for anyone using that number as a trigger point.

 

[COcheesehead]

Maybe this needs it's own "non-golden period" thread, but given that non-callable bonds (I'm restricting to CD's, T's, GSEs) are pretty much made out of unobtainium right now, lots of rungs past 3 years in the ladders are callable.


Assuming these rungs are called and rates are back to the bad ol' days of 0.1% from not that long ago, where do you look or what barrel bottoms get scraped to refill these called rungs? What rates were you getting in the dark days and and at what rating?

I watch yields. Generally longer in duration or lower in quality (though I do not buy junk level) will get you better yields, but there are always aberrations and if you run screens regularly, you can pick off some gems. I shop all categories. I buy taxable and non taxable munis - my state specific, CDs, etc. Closed end funds are also options. PDI, PDO will get you 10%-13% yields with more volatility.
Back in the dark days, my ladders still threw off 6 figures of income. Now they throw off 2X that. Enjoy. These are the days we hoped for.

 

[Spock]

I watch yields. Generally longer in duration or lower in quality (though I do not buy junk level) will get you better yields, but there are always aberrations and if you run screens regularly, you can pick off some gems. I shop all categories. I buy taxable and non taxable munis - my state specific, CDs, etc. Closed end funds are also options. PDI, PDO will get you 10%-13% yields with more volatility.
Back in the dark days, my ladders still threw off 6 figures of income. Now they throw off 2X that. Enjoy. These are the days we hoped for.

This might be where what's right for fat FIREs isn't good for lean FIREs.
My bond stack across all accounts is only going to throw off a total of 30K-50K/year until the bonds are called. But my annual spend is about that much so it works as long as I have assets than can generate that amount.

 

[Hilltopper]

Does it make sense that buying lower coupon bonds at a now discounted price affords some call protection? Or, if called, you effectively accelerate realizing the yield you would have otherwise gotten over the remaining term. I understand some may buy for the coupon payment and the lower coupon would not be desirable, but if looking for total return it seems like a good way to go(?)

 

[ShokWaveRider]

I am still waiting for the Elusive 5% FDIC insured CD. Getting ~4% in MM in the meantime. Once they come, all the MM funds will go into them.

 

[lordjust]

6% and 6%+ agency bonds are available again, for anyone using that number as a trigger point.

Thanks Cocheesehead... longer term .. but that should drive all the others up..hes on fidelity people

i only see
FHLB 6% 12/27/2032 Callable
3130AUB60
Recently Issued
Continuously-Callable on 06/27/2023 @ 100.00000

on schwab currently

 

[lawman]

I'm confused. If I buy a treasury at auction from Schwab when does it begin to accrue interest?