Corporate and Agency GSE Bond DEALS and NEW ISSUES

[PhotoAviation61]

New issue at Fidelity this morning. Royal Bank of Canada 6.125% 2038. 5 year no call.
CUSIP 78014RTS9

I am tempted however the duration gives me pause. I also have about 10% of portfolio in RBC so thinking might have too much concentration as it is.

Thoughts?

 

[imbatman]

It is a 15-year bond with a 5-year call. Honestly, I don't sweat duration at rates this high, as I firmly believe the call is your likely lifetime.

RBC is a good bank but still don't want too high of holdings in one company IMO.

For what rates have done in the last month, this is pretty decent if you think yields are going to continue to drop (I am not so sure we might have a little pullback but who knows)

 

[imbatman]

Separately, just got a call notice for my 6.65% FFCB (3133EPUM5) callable starting last week and promptly called for next week.

https://www.farmcreditfunding.com/ffcb_live/dataCenter/termDebtActivity.html#recentlyCalledTab

 

[COcheesehead]

Separately, just got a call notice for my 6.65% FFCB (3133EPUM5) callable starting last week and promptly called for next week.

https://www.farmcreditfunding.com/ffcb_live/dataCenter/termDebtActivity.html#recentlyCalledTab

I was just going to post this.

There was also a bid this morning for some 6.7% agency bonds that I hold, so I took it. The next call was in 3 weeks. Figured the writing was on the wall. Would rather reinvest now than in January.

 

[imbatman]

yeah not a bad idea @COcheesehead but honestly yields have dropped so much for me (mainly Muni buyer with after-tax funds), I am scratching my head a little on direction at this point.

 

[COcheesehead]

yeah not a bad idea @COcheesehead but honestly yields have dropped so much for me (mainly Muni buyer with after-tax funds), I am scratching my head a little on direction at this point.

I own a bunch of munis, but the opportunities for my situation are in corporates right now. I can make those work better even with paying the taxes.

 

[Montecfo]

I know I am supposed to keep the big picture in mind but I just can never pull the trigger on expense ratios over 1%......

Folks that got their investing chops at Bogle's knee have trouble with this. But these are unique funds. Shopping expense ratios only makes sense if you have a lower cost alternative.

 

[Montecfo]

Can you elaborate on the step ladder vs the ladder?... new concept for me.

I've been finding what I believe are good quality floating rate preferred stocks yield 6-9%+ and have been adding those a little at a time with GTC limit orders.

• ALL/PRB Allstate 8.71% yield BBB-
• ATH/PRE Athene (Apollo subsidiary) 7.58% yield BBB
• C/PRJ Citigroup 9.34% yield BB+
• JXN/PRA Jackson Financial 7.91% yield BB+
• MET/PRA MetLife 6.81% yield BBB-
• RZC Reinsurance Corporation of America 6.77% yield BBB+

Keep in mind that preferred stock ratings are typically two full notches below debt ratings (which I personally think is too much).

Step-ladder is is the small ladder which funds my spending out of my taxable account. The longer term extension ladder is in my rollover IRA. Always looking for good points to replenish the step ladder

On the variable rate preferred, I expect rates to continue to decline over the next year or so. So I'm a bit cautious on variable rate .

I do like fixed rate.

 

[COcheesehead]

So I had a bid on my 6.7% agency bonds which were likely to be called in January. I owned 50 so they would have paid me $3350 annually in interest - IF they weren’t called early. I sold them for $50,518 and bought 2000 shares of WDI which will pay $3360 annually. So almost identical. However the 2000 shares cost me just about $27,000. So the extra $23,500+ goes to cash at 5.21% and will be redeployed for something else someday or just be used for some more travel and fun.
So my income stays the same, but my cash increases.

 

[COcheesehead]

10 year is down a lot again today.

 

[imbatman]

I fully recognize others collectively know a lot of things I don't know and respect the opinions here....so googled a little on WDI. Why would I prefer that over the HFRO CEF? Similar size, lower expenses, similar distribution yield, but HFRO has much higher discount and half the leverage.

https://www.forbes.com/sites/michae...-closed-end-funds-yielding-8/?sh=84691d116474

https://www.morningstar.com/news/ma...n-mutual-funds-thanks-to-stock-market-turmoil

https://www.cefconnect.com/fund/HFRO

Admittedly, it appears the portfolios appear pretty different with HFRO showing equity holdings, so more due diligence needed there.

 

[COcheesehead]

I fully recognize others collectively know a lot of things I don't know and respect the opinions here....so googled a little on WDI. Why would I prefer that over the HFRO CEF? Similar size, lower expenses, similar distribution yield, but HFRO has much higher discount and half the leverage.

https://www.forbes.com/sites/michae...-closed-end-funds-yielding-8/?sh=84691d116474

https://www.morningstar.com/news/ma...n-mutual-funds-thanks-to-stock-market-turmoil

https://www.cefconnect.com/fund/HFRO

Admittedly, it appears the portfolios appear pretty different with HFRO showing equity holdings, so more due diligence needed there.

Well, let’s see, where to start.

HFRO is a 60/40 fund. Pays 10.71% yield and is not even earning its distribution at only 76% coverage of what it pays out. The bigger discount it carries is likely because it is returning capital and/or may be inline for a distribution cut.

WDI is strictly income and its sponsor has it structured to be a buy and hold. It distributes a 12.69% yield with a 16% discount to NAV. It’s earning more than it distributes at 103% coverage and its earnings and distributions are increasing. It also has 30 cents/share in undistributed income which sometimes results in a special dividend.

 

[imbatman]

Thanks @COcheesehead. I think WDI is down to about 10% discount as of today, but some good points. Anyhow, definitely gave me some new stuff to chew on.

 

[COcheesehead]

Thanks @COcheesehead. I think WDI is down to about 10% discount as of today, but some good points. Anyhow, definitely gave me some new stuff to chew on.

You are right on the discount. I guess I can’t read my own handwriting. I wrote down 10% and typed 16%.

 

[COcheesehead]

My 6.61% agency bonds just got called. Second one this week. The big guys are making their moves. They see what is ahead.

 

[pb4uski]

...On the variable rate preferred, I expect rates to continue to decline over the next year or so. So I'm a bit cautious on variable rate .

I do like fixed rate.

I do like fixed rate too, just not quite yet.

 

[Montecfo]

My 6.61% agency bonds just got called. Second one this week. The big guys are making their moves. They see what is ahead.

I think they SAW what was ahead when they issued.

But some good income for a while.

 

[COcheesehead]

I think they SAW what was ahead when they issued.

But some good income for a while.

True

 

[njhowie]

So this morning, one of my agency bonds was called, 3133EPVA0. I had qty 1 in my account, qty 2 was redeemed and now my positions show I am short qty 1.

It's Fidelity, add another issue to those of the past week.

 

[COcheesehead]

They’ll fix it.

 

[jldavid47]

I had this one called effective 12/15:
FHLB 5.75% 06/15/2026
CUSIP: 3130AWCA6

However, this one survived:
FHLB 5.5% 12/13/2024
CUSIP: 3130AWF62

So the 5.5% note survived but the 5.75% note was called.

EDIT: One thing I noticed is that the note that was called was trading a bit above part while the one that survived was trading a bit under par. I have another FHLB 5.5% note that could be called next week that is trading at about the same price at the 5.5% note that was not called. At this point I expect that not to survive call this time.

 

[COcheesehead]

I had a 6.61% and a 6.65% called. Payment on 12/11 and 12/13. I just appreciate that it happened now. I have options. I only have a handful of agency bonds left out of about 140.

 

[jldavid47]

FWIW, I'm not upset or concerned about my agency bonds getting called. I went into the trade with my eyes wide open. There are still plenty of opportunities out there.

 

[COcheesehead]

Continuously calleable bonds are not likely to trade more than a few cents above par, if at all and the likelihood of getting a bid is rare - unless you have a below market coupon and even then, there is no guarantee of longer term cashflow. Personal opinion, now is the time to lock in yields with non call or longer call window bonds.

 

[Chuckanut]

I had this one called effective 12/15:
FHLB 5.75% 06/15/2026
CUSIP: 3130AWCA6

time.

Oh Dear. I have a similar bond that matures three months earlier. Same rate. So far I haven’t heard anything. I was hoping to slip by below the radar.
This does not bode well.

I’ll take the extra income I earned. Thankfully, I don’t have many callable bonds or CDs. They aren't’ a good fit for my plans. YMMV.