Corporate and Agency GSE Bond DEALS and NEW ISSUES

[imbatman]

[Mod Edit] I was hoping we could potentially just share new issue or well priced secondary market Corporate Bonds and Agency GSE Bonds here? Please no economic theory or prediction discussions so we can keep this alive.

There are separate threads for TREASURIES and CDs/MMs/Savings Accounts.

Here is a good reference on Agency/ GSEs and how these may be useful for those with high local / state tax rates. Make sure you do your due diligence on bond ratings and your risk tolerance.

Please always include the CUSIP / Coupon Rate / Term / Call Date

To start, here are a couple of new agency that were posted today:

3130AWLM0 FHLB 6.14% 7-Year, callable 6-months (Jan 2024) - was on Fido
3130AWLN8 FHLB 6.30% 20-Year, callable 6-months (Jan 2024)

 

[imbatman]

Thanks for bringing this back mods!! Just to round out the links above for investment product threads, we also have separate posts for PREFERRED STOCKS and MUNICIPAL BONDS.

Back to the topic at hand............

I will say the above 6.14% sold out on Fido in less than 4 hours, and on Friday I purchased another agency/gse new issue that day (3130AWMM9 FHLB 6.15% 10-year, callable 6-months Jan 2024)...and it also sold out in about 3 hours. So these are going quick.

On Thursday I picked up this corporate on on Fido secondary market at $83.41 (about 6.35%), it has gone up a little but still in the same range. I buy corporates in my IRAs so don't sweat the tax treatment on discount purchase but do appreciate the discount / pre-payment of my interest so I have more funds to play with now:

91159HHW3 USB (A3/A) 10-Year (2029) 3.00% callable 04/30/2029

 

[PhotoAviation61]

I have been buying Agency bonds since last fall and there is a new issue FHLB bond that has a call provision I have never seen before.

3130AWL24 FHLB 6.15% 5-Year, callable 1-month (Aug 2023)

I have never seen such a call provision. Callable one month after issue and every month thereafter.

 

[gauss]

I have purchased Farm Credit Bank agency bonds on several occasions at Vanguard.

Here is a FHLB currently available on Vanguard.
Federal Home Loan Bank 6.25% due 7/24/2028 Callable 08/23
3130AWLE8

-gauss

 

[COcheesehead]

I own about 8-10 agency bonds in amounts of $5,000 to $110,000 all with coupons just below 6% to as high as 6.61%. All the ones within their call window have not been called.

 

[gauss]

I own about 8-10 agency bonds in amounts of $5,000 to $110,000 all with coupons just below 6% to as high as 6.61%. All the ones within their call window have not been called.

COcheesehead,

You might be in a good position to comment on a question of mine.

I was curious how much do market rates need to go below the stated coupon rates and/or for how long before an Agency bond is called.

I really like my Agency bonds but fear that it may be temporary due to call provisions.

Thanks for any insight that you may be able to provide.

-gauss

 

[COcheesehead]

COcheesehead,

You might be in a good position to comment on a question of mine.

I was curious how much do market rates need to go below the stated coupon rates and/or for how long before an Agency bond is called.

I really like my Agency bonds but fear that it may be temporary due to call provisions.

Thanks for any insight that you may be able to provide.

-gauss

I think it depends on more than just the coupon. It also depends on how much of the loans are repaid in the short term as well. The short answer is it’s hard to predict.
I buy new agencies based on them being called, but at a high enough coupon that if not, I can live with it.
If you want dependable income, I would look elsewhere or buy below par agencies at CD ish coupons on the secondary market. They might hold up longer and you are buying at discount.

 

[aja8888]

COcheesehead,

You might be in a good position to comment on a question of mine.

I was curious how much do market rates need to go below the stated coupon rates and/or for how long before an Agency bond is called.

I really like my Agency bonds but fear that it may be temporary due to call provisions.

Thanks for any insight that you may be able to provide.

-gauss

I had a FHLB 5.5% note bought late last year called in June. Then they immediately issued new notes with higher coupons. Go figure.

 

[dobig]

I own about 8-10 agency bonds in amounts of $5,000 to $110,000 all with coupons just below 6% to as high as 6.61%. All the ones within their call window have not been called.

I bought $400k of 2038 agency bonds with coupons of 6.23% to 6.375% certain they would be called in 3 months. I would be ecstatic if they didn't get called. Cusips 3133EPKT1, 3133EPMD4 and 3133EPNE1

 

[pb4uski]

I have been buying Agency bonds since last fall and there is a new issue FHLB bond that has a call provision I have never seen before.

3130AWL24 FHLB 6.15% 5-Year, callable 1-month (Aug 2023)

I have never seen such a call provision. Callable one month after issue and every month thereafter.

Callable a month after issue isn't totally uncommon. In fact, about 6 months ago I actually had one called about a month after issue, but it is rare in my experience. Stuff happens.

 

[MarieIG]

I had a FHLB 5.5% note bought late last year called in June. Then they immediately issued new notes with higher coupons. Go figure.

Gotta wonder who made that decision!

 

[aja8888]

Gotta wonder who made that decision!

Totally surprised me too!

 

[COcheesehead]

Gotta wonder who made that decision!

As I mentioned up thread, the decision to call is based on more than just the coupon.

 

[imbatman]

78014RPB0 RBC (A1/A) 5.7% 10-Yr (first call 5-years in 2028) on Fido

I'm not pulling the trigger yet on this as interest rate likely a little low once Fed increases, but if you aren't a cheap b8stard scrounging for every penny (guilty as charged), the idea of locking in 5.7% for 5-years from a top rated bank is pretty appealing

 

[COcheesehead]

I just did a quick scan this morning and all the highest yielding investment grade bonds are BDCs, banks and REITs. Pretty easy to identify what the market views as risky.

 

[pb4uski]

BDCs and REITs I totally get, but banks? or are the banks that you are referring to regional banks and not the big guys?

 

[COcheesehead]

BDCs and REITs I totally get, but banks? or are the banks that you are referring to regional banks and not the big guys?

Regionals mostly like Key, Valley Bank, Ally, but some former big players like Deutsche are some that I remember that are near the top of the yields.

 

[MrEd]

Callable Bonds

3130AWLM0 FHLB 6.14% 7-Year, callable 6-months (Jan 2024) - was on Fido
3130AWLN8 FHLB 6.30% 20-Year, callable 6-months (Jan 2024)

These bonds seemingly offer good rates for long periods of time. However, these bonds are CALLABLE which means they can be retired in six months by the issuer.

Imo, NOT a good deal.

 

[MrEd]

Call Provisions

I really like my Agency bonds but fear that it may be temporary due to call provisions.

Someone here is thinking.

You should look for NON CALLABLE bonds at attractive rates otherwise you are holding a short-term Cd at best.

 

[COcheesehead]

I really like my Agency bonds but fear that it may be temporary due to call provisions.

Someone here is thinking.

You should look for NON CALLABLE bonds at attractive rates otherwise you are holding a short-term Cd at best.

And some people buy agency bonds as such.

 

[MrEd]

agency bonds

there are agency bonds which are non callable

What's the point in investing at attractive rates if not for the long-term?

Defeats the purpose of investing at attractive rates before the fed cuts rates.

Rookie move.

 

[imbatman]

well it depends on how much they are compensating you to take short term gain at risk of long term pain. I find very few long-term (to me that would be 2027 or later) agencies paying more than 4-4.5%....or I can get a guaranteed 6.15% for 6 months.....so the question is, do I think new issue agencies are going to be LESS than 4-4.5% in 6-months? Me, no I do not.

 

[COcheesehead]

there are agency bonds which are non callable

What's the point in investing at attractive rates if not for the long-term?

Defeats the purpose of investing at attractive rates before the fed cuts rates.

Rookie move.

Let’s not make this thread divisive like the other, OK. There are points all along the curve that are investable for different reasons.

 

[Montecfo]

If a new issue bond is immediately callable, that is a non-starter for me. And in that case the rate can't be high enough to compensate you, in my view, because you could get the money back in a month compared to 5 years for example.

Now, in the secondary market you may find callable bonds trading at a discount. In such cases the call feature is not an issue since it is unlikely to be called and you have a "cushion" between par and the purchase price. They have to pay you in order to call it or rates have to fall a lot (which also pays you in realizing the value more quickly).

Call them "cushion callables". They can make a lot of sense.

Now, some folks are trying to live off of their interest. These might not work as well there since coupons are much lower.

 

[pb4uski]

there are agency bonds which are non callable

What's the point in investing at attractive rates if not for the long-term?

Defeats the purpose of investing at attractive rates before the fed cuts rates.

Rookie move.

With all due respect Mr. Ed (like the screen name by the way), the rookie move is painting these callable agency bonds as bad with such a wide brush. There can be instances where it makes perfect sense. It's very situational. It all depends whether you are being adequately compensated for the call risk.

I bought a new issue 6.375% FHLB callable at par the end of Nov 2022. It's a 2037 maturity and I highly doubt that it will last that long, but I don't care. My investment hypothesis at the time was that the Fed was likely to continue to increase interest rates for a year or so to tame inflation, the keep rates level for a while after that, and then perhaps rates would gradually decrease to an extent where the bond might be called. So when I bought it I was thinking it would likely last for a few years and then be called. It's still alive and I happily collecting my 6.375% coupon and next call is Dec 15. Given the current rate forecast I think it will persist for a while.

Let's say that it does end up lasting 3 years at 6.375% and is then called and I am forced to reinvest for 2 years at 5%... that would be 5.825% over the 5 years. What non-callable Aaa credit for 5 years was paying 5.825% in Nov 2022?

Now on the other hand, I did have an agency issue that was called after just one month, but no big deal, it was very easy to find a replacement.

There are times where the rates for callable issues trade at an attractive premium and there are times when the premium is not particularly attractive. Today, the best yield on an agency callable maturing in 5 years (2028) is about 5.988% and the best yield for a non-callable maturing in 2028 is 4.447%... IMO 154 bps is a pretty good premium for the call risk.

FEDERAL HOME LN MTG 6% 07/24/2028 Callable
3134GYVH2
Recently Issued
10/24/2023 @ 100.00000	6.000	07/24/2028	Yes	Ask	25	100.05000	1	2911	5.988	5.797	--	25,012.500

FFCB 2.8% 11/07/2028
3133EA7F9	2.800	11/07/2028	No	Ask	25	92.27400	25	25	4.447	--	128.330	23,196.830