Buying bonds today...Help!

[Graybeard]

Are I Bonds only purchased through Treasury Direct or can I buy them in my Vanguard taxable trust account? From what I remember, buying them at Treasury Direct means they can't be owned by a revocable living trust. My taxable account is owned by my revocable living trust so that would be where I would want to own them.

 

[lawman]

Here is something that might help you.

https://docs.google.com/spreadsheets/d/1M18jyMWV54AAcrks45VgISIgzbxu_7uy23gSJG1Ed80/edit#gid=0

Scroll down to: "Financial Pfds and ETDs"

When you see the yields on bank preferred stocks from banks such as JP Morgan, Bank of America, Capital One Financial, and Wells Fargo hit 8% or higher start backing up your truck. When yields start hitting 9% start loading up your truck. Then sit back and enjoy the nice juicy yield and watch your original capital almost double in short time as funds buy back the very same issues they sold.

What will you be buying?

 

[Freedom56]

What will you be buying?

In terms of preferred stocks, the high quality preferred stocks at steep discounts.

Insurance Companies:

Allstate
Arch Capital
Renaissance Holdings

Financials:

Bank of America
Capital One Financial
First Republic Bank
JP Morgan
Schwab
State Street Corp
US Bancorp
Wells Fargo

With preferred stocks you want to stay with quality issuers. We are only two percent points away in yield from backing up the truck.

 

[lawman]

In terms of preferred stocks, the high quality preferred stocks at steep discounts.

Insurance Companies:

Allstate
Arch Capital
Renaissance Holdings

Financials:

Bank of America
Capital One Financial
First Republic Bank
JP Morgan
Schwab
State Street Corp
US Bancorp
Wells Fargo

With preferred stocks you want to stay with quality issuers. We are only two percent points away in yield from backing up the truck.

I've never bought preferred stocks so I'm hesitant to buy something I'm not familiar with..Is that what you will be buying?

 

[Freedom56]

I've never bought preferred stocks so I'm hesitant to buy something I'm not familiar with..Is that what you will be buying?

I will continue to buy short term corporate notes with maturities in 2024 through 2026 and hold them through maturity. They are still overpriced given the current environment (low coupons in a rising rate environment). I normally buy preferred stocks during periods of massive sell-offs and then hold them until they recover close to par value or higher collecting a nice yield and then just dump them. There is no compelling reason to buy fixed income now unless they are short term (2-3 years) and you are getting a yield of at least 6%. In a month from now the yields will be much higher. The real bargains will appear November through December of this year during tax loss selling season. With a little patience, we may see the 9-10% yields on investment grade short term corporate notes like we did in March 2020. The reason this is possible is that as the 10 year note rises it triggers selling of bond funds that are yielding less than treasuries or where their yield spreads don't compensate for their market risk. This in turn causes selling of their individual bond holdings causing prices to drop and yields to rise. Remember, "panic" is not a plan. Have a shopping list ready of solid companies with good earnings and free cash flow and watch the prices and yields of their corporate debt.

 

[lawman]

I will continue to buy short term corporate notes with maturities in 2024 through 2026 and hold them through maturity. They are still overpriced given the current environment (low coupons in a rising rate environment). I normally buy preferred stocks during periods of massive sell-offs and then hold them until they recover close to par value or higher collecting a nice yield and then just dump them. There is no compelling reason to buy fixed income now unless they are short term (2-3 years) and you are getting a yield of at least 6%. In a month from now the yields will be much higher. The real bargains will appear November through December of this year during tax loss selling season. With a little patients, we may see the 9-10% yields on investment grade short term corporate notes like we did in March 2020. The reason this is possible is that as the 10 year note rises it triggers selling of bond funds that are yielding less than treasuries or where their yield spreads don't compensate for their market risk. This in turn causes selling of their individual bond holdings causing prices to drop and yields to rise. Remember, "panic" is not a plan. Have a shopping list ready of solid companies with good earnings and free cash flow and watch the prices and yields of their corporate debt.

Gotcha! thanks and good luck!

 

[lawman]

Gotcha! thanks and good luck!

Why will you continue to by 2 year bonds instead of waiting until the end of the year?

 

[lawman]

I will continue to buy short term corporate notes with maturities in 2024 through 2026 and hold them through maturity. They are still overpriced given the current environment (low coupons in a rising rate environment). I normally buy preferred stocks during periods of massive sell-offs and then hold them until they recover close to par value or higher collecting a nice yield and then just dump them. There is no compelling reason to buy fixed income now unless they are short term (2-3 years) and you are getting a yield of at least 6%. In a month from now the yields will be much higher. The real bargains will appear November through December of this year during tax loss selling season. With a little patients, we may see the 9-10% yields on investment grade short term corporate notes like we did in March 2020. The reason this is possible is that as the 10 year note rises it triggers selling of bond funds that are yielding less than treasuries or where their yield spreads don't compensate for their market risk. This in turn causes selling of their individual bond holdings causing prices to drop and yields to rise. Remember, "panic" is not a plan. Have a shopping list ready of solid companies with good earnings and free cash flow and watch the prices and yields of their corporate debt.

Why will you continue to by 2 year bonds instead of waiting until the end of the year?

 

[Freedom56]

Why will you continue to by 2 year bonds instead of waiting until the end of the year?

If the yield is right I will.

 

[COcheesehead]

If the yield is right I will.

You might be getting your capitulation soon.

https://www.fidelity.com/news/article/top-news/202205060733RTRSNEWSCOMBINED_KCN2MS0VN-OUSBS_1

Back in March of 2020, there were about 4-5 days were muni’s were on sale for stupid prices because the world was coming to an end. They got gobbled up quick. Bought all I could. Wish I could have bought more.

 

[pb4uski]

I have Treasury Direct account and lots of I-bonds but I think I may just get another... Is the $10,000.00 limit each calendar year or 1 year from last purchase?

Each calendar year, but if you are married you can also fund your spouses 2023 $10,000 allowance and 2024 $10,000 allowance and have them do the same and buy $40k locked into the current 9.4% rate.

 

[lawman]

You might be getting your capitulation soon.

https://www.fidelity.com/news/article/top-news/202205060733RTRSNEWSCOMBINED_KCN2MS0VN-OUSBS_1

Back in March of 2020, there were about 4-5 days were muni’s were on sale for stupid prices because the world was coming to an end. They got gobbled up quick. Bought all I could. Wish I could have bought more.

Count me among the capitulated. Sold out and started buying tax fee munis..May hold off on buying more for a little while..

 

[Freedom56]

You might be getting your capitulation soon.

https://www.fidelity.com/news/article/top-news/202205060733RTRSNEWSCOMBINED_KCN2MS0VN-OUSBS_1

Back in March of 2020, there were about 4-5 days were muni’s were on sale for stupid prices because the world was coming to an end. They got gobbled up quick. Bought all I could. Wish I could have bought more.

I see no evidence of that now. All I see is the same drip, drip, drip erosion of prices and slow rise in yields. Leveraged muni bond CEFs normally yield 7-7.5% and unleveraged about 5-5.5% at times of capitulation. They are only yielding 5.5% and 3.4% now. Preferred CEFs yield about 11% during capitulation but they are now only yielding 8% now. Besides we are 6 months away from tax loss selling season when the real damage is done.

 

[Freedom56]

Count me among the capitulated. Sold out and started buying tax fee munis..May hold off on buying more for a little while..

Just hold your cash in money market accounts or fund until the time is right. Don't even start the engine on your truck. Yields are not at a level on investment grade corporate notes, muni bonds, preferred stocks, CDs where there is near zero risk of capital erosion if you were to buy funds covering those types of investment. I-Bond yields are great now but you can only buy $10K for yourself and $10K for your spouse. The rates are not fixed for the 5 year term. Pretty soon you will be able to buy 5 year corporate notes with similar YTM limited only by what funds are dumping.

 

[lawman]

Just hold your cash in money market accounts or fund until the time is right. Don't even start the engine on your truck. Yields are not at a level on investment grade corporate notes, muni bonds, preferred stocks, CDs where there is near zero risk of capital erosion if you were to buy funds covering those types of investment. I-Bond yields are great now but you can only buy $10K for yourself and $10K for your spouse. The rates are not fixed for the 5 year term. Pretty soon you will be able to buy 5 year corporate notes with similar YTM limited only by what funds are dumping.

I'm inclined to agree with you..We may be wrong and rates may not go above a rate that is already baked into prices but I think I will take your advice and park my cash for a while..The only thing I may take more risk on is an all weather fund (BLNDX). I have been watching it for a while and have a significant investment in it already..I like it a lot..

 

[jazz4cash]

You might be getting your capitulation soon.

https://www.fidelity.com/news/article/top-news/202205060733RTRSNEWSCOMBINED_KCN2MS0VN-OUSBS_1

Back in March of 2020, there were about 4-5 days were muni’s were on sale for stupid prices because the world was coming to an end. They got gobbled up quick. Bought all I could. Wish I could have bought more.

I have a habit of checking pre-market levels on Sunday night. I recall vividly in early March of 2020 that the market was especially volatile that weekend. I noticed the 10 year treasury note dropped all the way to 0.54%. The 1 yr T-bill was 0.31% Think about that! I was able to grab a few Muni bargains but I was not prepared like I will be this time.

 

[JJpop]

Just hold your cash in money market accounts or fund until the time is right. Don't even start the engine on your truck. Yields are not at a level on investment grade corporate notes, muni bonds, preferred stocks, CDs where there is near zero risk of capital erosion if you were to buy funds covering those types of investment. I-Bond yields are great now but you can only buy $10K for yourself and $10K for your spouse. The rates are not fixed for the 5 year term. Pretty soon you will be able to buy 5 year corporate notes with similar YTM limited only by what funds are dumping.

I hope you are right but of course no one really can know.
I have chosen to start buying now and lock in some decent rates while saving some if rates really take off.

 

[lawman]

I hope you are right but of course no one really can know.
I have chosen to start buying now and lock in some decent rates while saving some if rates really take off.

I'm hoping to do the same..I used a portion of my cash to buy a 3 month treasury today..

 

[JJpop]

I'm hoping to do the same..I used a portion of my cash to buy a 3 month treasury today..

You never know.

If you buy a 4 year CD yielding 3.15 today in 2 years it is a 2 year CD yielding 3.15.

Even if rates go up it is not bad.

I have bought 2,3,4,5 and a 10 year CD’s in the last week or so.
I bought 1 year treasuries for our HSA.

The 10 year was 3.5 which is good enough for me but it is callable.

If rates really rise I have a bunch that are maturing in the next few months to 2 years and more.

 

[jazz4cash]

You never know.



If you buy a 4 year CD yielding 3.15 today in 2 years it is a 2 year CD yielding 3.15.



Even if rates go up it is not bad.

Yes Excellent point! That’s the way I look at too. Now rates could be higher in 2 years and it may not feel so good but that’s why you ladder.

 

[lawman]

Yes Excellent point! That’s the way I look at too. Now rates could be higher in 2 years and it may not feel so good but that’s why you ladder.

No one knows but I'm holding my cash except for what I have in 3 month bonds.. If the Fed decides to get serious about inflation rates will have to double from here..It's a gamble but I'll give up a little return in the short term for a better return in the intermediate term...One thing I know for sure is no more bond funds for me anytime soon..

 

[COcheesehead]

I have a habit of checking pre-market levels on Sunday night. I recall vividly in early March of 2020 that the market was especially volatile that weekend. I noticed the 10 year treasury note dropped all the way to 0.54%. The 1 yr T-bill was 0.31% Think about that! I was able to grab a few Muni bargains but I was not prepared like I will be this time.

People dumped muni’s back then because there was no way municipalities could pay for their debt. Oh, except they had a thing called taxes.

 

[COcheesehead]

I run a daily scan of muni’s for my state. There has a been a noticeable- 30% - drop in inventory. Bond funds are being sold, bonds are on the market and people are buying them at good yields. Best yields? Who knows. Just another data point to consider.

 

[lawman]

I run a daily scan of muni’s for my state. There has a been a noticeable- 30% - drop in inventory. Bond funds are being sold, bonds are on the market and people are buying them at good yields. Best yields? Who knows. Just another data point to consider.

The only way I know to buy individual bonds is through Schwab on the bond offering page..Are those deals as good as any or are there better deals available?

 

[COcheesehead]

The only way I know to buy individual bonds is through Schwab on the bond offering page..Are those deals as good as any or are there better deals available?

I don’t use Schwab. They may only show you what they have in inventory, or the whole market, I really can’t say.

You can see daily high and median yields on Fidelity’s fixed income page so you at least have a benchmark to compare Schwabs offerings.