Corporate and Agency GSE Bond DEALS and NEW ISSUES

[COcheesehead]

Depends what you want. An agency may get you high current income, but most of the new issues aren’t going to give you reliable income. There are better options for reliability.
With where we are in the interest rate cycle, the risk will soon switch to being too short in duration whereas prior, you took it in the shorts if you were too long in duration.

 

[Montecfo]

I feel we are right at the top of the rate cycle. So I don't see doing callables with short call cycles and long duration.

I find it hard to come up with a good way to use callables unless there is a lot of protection.

I can't rely on them being called, say for my stepladder. Also can't bank on not for my regular ladder.

 

[jldavid47]

Depends what you want. An agency may get you high current income, but most of the new issues aren’t going to give you reliable income. There are better options for reliability.

As I said, those are rules that fit me. If you have different goals or risk tolerances, then my rules wouldn't fit you.

With where we are in the interest rate cycle, the risk will soon switch to being too short in duration whereas prior, you took it in the shorts if you were too long in duration.

Maybe. No one knows for sure what is going to happen.

 

[Affinity4Investing]

... but most of the new issues aren’t going to give you reliable income...

Can you elaborate... Why is the income not reliable on a new FFCB issue? Maybe if you are talking about them not having FDIC coverage, but otherwise, I don't get this one considering the established history of these guys.

 

[COcheesehead]

Can you elaborate... Why is the income not reliable on a new FFCB issue? Maybe if you are talking about them not having FDIC coverage, but otherwise, I don't get this one considering the established history of these guys.

I am talking call protection. If I want X years of virtually guaranteed income, an agency usually has only 90-180 days of protection, some exceptions. That’s not reliable. If called, you have reinvestment risk.
There are lots of call protected bonds paying good yields right now.

 

[Cat-tirement]

I have a newbie to corporate bonds question. I was looking at some bonds from Pacificorp. Does their ownership by Berkshire Hathaway lower the risk, kind of like the federal government connection lowers agency bond risk? i.e. would the corporate parent Berkshire be likely to back up Pacificorp if it got into trouble?

 

[imbatman]

Been away and catching up but here is an interesting Agency I see going through my scans:

FFCB (3133EPWG6) 25-Year 6.55% 1-Year Call

 

[Affinity4Investing]

Some new floating rate notes from BofA for anyone interested


https://ir.stockpr.com/bankofameric...ontent/0001193125-23-235159/d470362d424b5.htm

 

[Affinity4Investing]

I have a newbie to corporate bonds question. I was looking at some bonds from Pacificorp. Does their ownership by Berkshire Hathaway lower the risk, kind of like the federal government connection lowers agency bond risk? i.e. would the corporate parent Berkshire be likely to back up Pacificorp if it got into trouble?

IMO, it might provide only a slight degree of comfort - but not enough to make me want to go anywhere near their offerings. These folks have some challenging and costly years ahead as they cave to the woke regulators who have them by the throat. The amount of debt they are going to have to deal with as they eliminate almost all of their coal fired generating plants is 'gulp'. You might want to consider some other ute's with established and strong histories. I'd suggest NEE, SO, DUK, etc.

 

[Affinity4Investing]

I have a newbie to corporate bonds question. I was looking at some bonds from Pacificorp. Does their ownership by Berkshire Hathaway lower the risk, kind of like the federal government connection lowers agency bond risk? i.e. would the corporate parent Berkshire be likely to back up Pacificorp if it got into trouble?

This is one article you might find helpful and provides more color to what I was saying in my other post:


https://www.cnbc.com/2023/08/28/wil...e-billions-in-liability-with-aging-lines.html

 

[jldavid47]

For those of you wondering how callable Agency bonds behave from a call perspective, here's my recent experience;

1) Last week I had a FHLB note paying 5.75% survive its first call. Next call date is in December.

2) This week I had a FHLB note paying 5.58% survive its first call. Next call date is in December.

3) This week I had a FHLB note paying 5.50% survive its third call. Next call date is in December.

I have two more coming up:

1) Next week I have a FHLB note paying 5.65% subject to call. Based on recent experience I expect that one to survive. It is callable monthly after that.

2) Middle of next month I have a FHLB note paying 5.875% subject to call. This one will be interesting. I expect it to survive, but conditions can change. It is continuously callable after that.

All of these are trading under par which is probably an indication as to why they have not been called.

 

[COcheesehead]

For those of you wondering how callable Agency bonds behave from a call perspective, here's my recent experience;

1) Last week I had a FHLB note paying 5.75% survive its first call. Next call date is in December.

2) This week I had a FHLB note paying 5.58% survive its first call. Next call date is in December.

3) This week I had a FHLB note paying 5.50% survive its third call. Next call date is in December.

I have two more coming up:

1) Next week I have a FHLB note paying 5.65% subject to call. Based on recent experience I expect that one to survive. It is callable monthly after that.

2) Middle of next month I have a FHLB note paying 5.875% subject to call. This one will be interesting. I expect it to survive, but conditions can change. It is continuously callable after that.

All of these are trading under par which is probably an indication as to why they have not been called.

They are issuing new bonds at rates in the mid 6% range. You likely will survive calls until rates begin to go the other way which may not be until next year +.

 

[imbatman]

that is a helpful status @jldavid47, thanks for sharing I have a similar list myself (6.1-6.33% callable but not called)....but I agree with @COcheesehead, hard to understand why they would pay 6.55% on new issues (3133EPWG6 still available today on Fido) but call something almost a full point lower

 

[COcheesehead]

that is a helpful status @jldavid47, thanks for sharing I have a similar list myself (6.1-6.33% callable but not called)....but I agree with @COcheesehead, hard to understand why they would pay 6.55% on new issues (3133EPWG6 still available today on Fido) but call something almost a full point lower

I have yet to have anything over 6% called and new, longer duration, issues are coming out at higher rates. So maybe we have not seen a top yet. It would be nice to squeeze out 6% plus, super high quality, returns for awhile longer even if they get called in 12-18 months. Nothing else for similar risk/duration returns as much.

 

[jldavid47]

They are issuing new bonds at rates in the mid 6% range. You likely will survive calls until rates begin to go the other way which may not be until next year +.

Not in the time frame of these notes. They are issuing new debt in the 5.5%-5.8% range 2-3 years out.

 

[pb4uski]

The way I look at callables is if I buy a 5 year callable and get 6% for 2-1/2 years and it gets called and I am forced to reinvest at 5% for the final 2-1/2 years, I still average out 5.5% so just as good as a 5.5% non-callable.

It could go against me if it gets called and I am forced to reinvest at less than 5% but at the same time it could be better if rates stay high and the 6% lasts longer than 2-1/2 years. A chance that I'm willing to take.

 

[COcheesehead]

Not in the time frame of these notes. They are issuing new debt in the 5.5%-5.8% range 2-3 years out.

For the shortest durations at Fidelity right now, 2028 maturity, new issues, they are 5.8%-6%.

 

[jldavid47]

Not in the time frame of these notes. They are issuing new debt in the 5.5%-5.8% range 2-3 years out.

Just after I posted this, the FHLB issued a 3-year note callable monthly starting 10/25/23 with a 6% coupon. So, I stand corrected.

 

[Z3Dreamer]

Just after I posted this, the FHLB issued a 3-year note callable monthly starting 10/25/23 with a 6% coupon. So, I stand corrected.

I was watching the 3 year FHLB. Got me some 5.904% this afternoon. Cusip 3130AX5E4.

 

[imbatman]

I was watching the 3 year FHLB. Got me some 5.904% this afternoon. Cusip 3130AX5E4.

3-year BUT it is callable starting in 3 months....still not too bad if you want to avoid a potential longer-term lock-in (in return for a higher rate).

 

[Z3Dreamer]

3-year BUT it is callable starting in 3 months....still not too bad if you want to avoid a potential longer-term lock-in (in return for a higher rate).

Yup.

 

[JC888]

any liquid corp bonds been issued with barely decent investment grade that gets to 6% now?

 

[pb4uski]

A few out on Schwab. Don't recall the details but they are there. All callable though.

 

[COcheesehead]

any liquid corp bonds been issued with barely decent investment grade that gets to 6% now?

If you are open to the secondary market, I just ran a screen on Fidelity. There are 1810 investment grade corporate bonds yielding at least 6%. Durations from 1 month to 95 years.

 

[Affinity4Investing]

any liquid corp bonds been issued with barely decent investment grade that gets to 6% now?

(yields are approximate)

Allstate 8.564% 020002BB6
Ally 7% 02006DJ44
Ares 7% 04010LBE2
Enbridge 7.6% 29250NBP9
Jefferies 6.5% 47233WBR9
Prudential 6.75% 744320BL5