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

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Echard said:
what about bonds like Blackstone Private Credit Fund.

CUSIP 09261HAD9
YTW 7.157%
Call Protection until 11/26
Matures 12/26
Baa3/BBB-
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What are trying to achieve? Is this risk money, for cashflow, part of a ladder, deferred, taxable? Without clarity of purpose, it’s hard to decide if it’s right or not for you.
 
I had two make whole bonds called around the end of October 2022. One had a coupon of 6.875% and a maturity of 12/1/23 (about 13 months to maturity). The other had a coupon 7.5% and a maturity of 4/1/2024 (17 months to maturity). The problem was that the benchmark for the spread calculation was based on the 2 year treasury note plus 1 point. With rates up in 2022, it became less expensive for issuers to call make whole call bonds. I received $102.8 for the 6.875% note and $104.81 for the 7.5% notes plus accrued interest. Obviously the premium does not cover the loss of all the remaining coupon but I ended up rolling the proceeds into the Goldman Sachs 6.75% notes and Bank of America 6.35% notes which ended up become a good trade in my favor given the exchange for BB- notes to BBB+ and A1 notes and coupons higher than treasuries.
 
COcheesehead said:
What are trying to achieve? Is this risk money, for cashflow, part of a ladder, deferred, taxable? Without clarity of purpose, it’s hard to decide if it’s right or not for you.
Click to expand...

Here are my targets:

Equity of various types 50% - done
Investment grad bonds of 25%, both treasuries, corporate
High yield bonds 5% - mostly done
Private debt 5% - done
Real estate related - 5% mostly done
Alternative investments 1-2%, mostly done
Inflation (iBonds, commodities) 2-3%, done, handling TIPS as part of bonds
Cash 5% - done

My current bond ladder is hardly built. I have some investment grade and high yield bonds going out in years 2024 to 2028, but not much yet. My gaps are:

1. Invest the rest of the bonds, mostly moving from short term treasuries to longer term corporate, treasury, and TIPS.
2. I don't have a clear mix of what I want from corporate vs treasury vs TIPS. Trying to figure out the right mix.
3. In the meantime, I know I need corporate bonds between 2025-2028'ish.

Saw this and liked the yield and fact it's investment grade.
 
Echard said:
Here are my targets:

Equity of various types 50% - done
Investment grad bonds of 25%, both treasuries, corporate
High yield bonds 5% - mostly done
Private debt 5% - done
Real estate related - 5% mostly done
Alternative investments 1-2%, mostly done
Inflation (iBonds, commodities) 2-3%, done, handling TIPS as part of bonds
Cash 5% - done

My current bond ladder is hardly built. I have some investment grade and high yield bonds going out in years 2024 to 2028, but not much yet. My gaps are:

1. Invest the rest of the bonds, mostly moving from short term treasuries to longer term corporate, treasury, and TIPS.
2. I don't have a clear mix of what I want from corporate vs treasury vs TIPS. Trying to figure out the right mix.
3. In the meantime, I know I need corporate bonds between 2025-2028'ish.

Saw this and liked the yield and fact it's investment grade.
Click to expand...

Super helpful. So I would think this bond would fit into your 5% high yield category because it’s right on the edge of investment grade. I would ladder within this category as well. Shorter durations are likely to be safer. If the economy worsens, lower grade bonds may be at risk.
 
Anyone have any rules of thumb they've developed for what percentage of a bond ladder to put into Corporate vs TIPS vs Treasuries?

I've seen recommendations of 5--20% of total bond allocation to put in TIPS, with a higher percentage as you get older.

As far as corporate vs treasury, I have no treasuries out past a year right now because of the drop-off compared to corporate bonds. So, I'm thinking it would be mostly corporate.

So, maybe for the total of 25% Investment Grade Bonds:
ST Treasuries 5%
Inv Grade Corporate 15%
TIPS withi a duration ~3-7 years of 5%
 
Echard said:
I hope we haven’t missed the peak of rates.
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All bond traders are doing at the long end is re-inflating the economy and the stock market bubble. Under normal interest rates at 2.5% inflation, the 10 year note trades at a yield of 4.25% and 4.5%. We are nowhere near 2.5% inflation. Even the bond "experts" featured by the Wall Street Journal are advising to avoid the long end because yields are abnormally low.
 
Everybody paying attention bought the higher rates back in November ish. The 2 year and below should still rise a bit, but if folks think a recession is coming, anything with yield will be bought. I bought some 5.4% B of A 5 year bonds this morning and they are all sold out already.
 
Royal Bank of Canada has a new issue out with 5 years of call protection at Fidelity.
ROYAL BK CDA SUSTAINABL SER I MTN 5.20000% 01/31/2033

78014RKL3

Call Date Call Price Call Type
01/31/2028 100.000 Par Call
07/31/2028 100.000 Par Call
01/31/2029 100.000 Par Call
07/31/2029 100.000 Par Call
01/31/2030 100.000 Par Call
07/31/2030 100.000 Par Call
01/31/2031 100.000 Par Call
07/31/2031 100.000 Par Call
01/31/2032 100.000 Par Call
07/31/2032 100.000 Par Call

I placed an order for this one.
 
Freedom56 said:
Royal Bank of Canada has a new issue out with 5 years of call protection at Fidelity.
ROYAL BK CDA SUSTAINABL SER I MTN 5.20000% 01/31/2033

78014RKL3

Call Date Call Price Call Type
01/31/2028 100.000 Par Call
07/31/2028 100.000 Par Call
01/31/2029 100.000 Par Call
07/31/2029 100.000 Par Call
01/31/2030 100.000 Par Call
07/31/2030 100.000 Par Call
01/31/2031 100.000 Par Call
07/31/2031 100.000 Par Call
01/31/2032 100.000 Par Call
07/31/2032 100.000 Par Call

I placed an order for this one.
Click to expand...
I was literally just looking at this on Fidelity. No call till 1/28 with a 5.25 coupon is looking pretty good right now.
 
finnski1 said:
I was literally just looking at this on Fidelity. No call till 1/28 with a 5.25 coupon is looking pretty good right now.
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An inverted yield curve would be silly with corporate bonds. Keep in mind that most longer duration non-callable bonds in the secondary market are low coupon. I'm sure other banks will follow. The Royal Bank of Canada is the safest bank in North America and top 15 safest in the world.
 
finnski1 said:
I was literally just looking at this on Fidelity. No call till 1/28 with a 5.25 coupon is looking pretty good right now.
Click to expand...

I saw that one to and was put off by the 10-year term but on second thought 5 years of call protection sounds pretty good.
 
pb4uski said:
I saw that one to and was put off by the 10-year term but on second thought 5 years of call protection sounds pretty good.
Click to expand...
Yeah. Ideally I'm looking for 3-5 year terms but 5 years of call protection kind of works out to that. Possibly. I think.:facepalm:
 
Freedom56 said:
Royal Bank of Canada has a new issue out with 5 years of call protection at Fidelity.
ROYAL BK CDA SUSTAINABL SER I MTN 5.20000% 01/31/2033

78014RKL3

Call Date Call Price Call Type
01/31/2028 100.000 Par Call
07/31/2028 100.000 Par Call
01/31/2029 100.000 Par Call
07/31/2029 100.000 Par Call
01/31/2030 100.000 Par Call
07/31/2030 100.000 Par Call
01/31/2031 100.000 Par Call
07/31/2031 100.000 Par Call
01/31/2032 100.000 Par Call
07/31/2032 100.000 Par Call

I placed an order for this one.
Click to expand...


I was a bit too late. It's gone.
 
COcheesehead said:
Reminds me of November ish when anything with yield flew off the shelf. I think buyers are sensing something.
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Buyers are being selective. High grade corporate notes with limited call protection with coupons below 5.5% in general are not selling out. Investors are paying or higher coupons or longer call protection. Eventually banks will figure this out.

This is the "golden period" where even people in money market funds are earning reasonable interest.
 
We are entering a "Golden Period" for fixed income investing

COcheesehead said:
Everybody paying attention bought the higher rates back in November ish. The 2 year and below should still rise a bit, but if folks think a recession is coming, anything with yield will be bought. I bought some 5.4% B of A 5 year bonds this morning and they are all sold out already.
Click to expand...



Yes, there were some great yields on 2039 Union Electric and 2033 and 2035 Empire District Electric senior unsecured I mentioned here several months ago. They have dropped back 150 bps in yield since then. If one hangs on the short end too long, they wind up on the short end of the stick eventually. Although I kept some I sold some as I wont hold a 5% 15 year duration. There will be another shot sometime again.
I just wish I had been a bit more aggressive, but I guess I should be pleased with what I did.
….But if recession or some crisis occurs credit spreads could widen nicely and provide another opportunity, even if Treasuries go lower.
 
Last edited:
Freedom56 said:
Royal Bank of Canada has a new issue out with 5 years of call protection at Fidelity.
ROYAL BK CDA SUSTAINABL SER I MTN 5.20000% 01/31/2033

78014RKL3

Call Date Call Price Call Type
01/31/2028 100.000 Par Call
07/31/2028 100.000 Par Call
01/31/2029 100.000 Par Call
07/31/2029 100.000 Par Call
01/31/2030 100.000 Par Call
07/31/2030 100.000 Par Call
01/31/2031 100.000 Par Call
07/31/2031 100.000 Par Call
01/31/2032 100.000 Par Call
07/31/2032 100.000 Par Call

I placed an order for this one.
Click to expand...

just saw this post. Looking at this at Fidelity, it doesn't show as a new issue. Looks like it is fully subscribed (sold out)?
 
Somehow I don't think inflation is nearly over. Time will tell.
 
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