Corporate and Agency GSE Bond DEALS and NEW ISSUES

[imbatman]

Saw in Fido today:

3133EPXK6 Federal Farm 10-Year (Jan 2024 Call) 6.7%

Too short call risk for me but seeing that rate on a AAA bond, exempt from state/ local tax, is something else.

 

[Spock]

Saw in Fido today:

3133EPXK6 Federal Farm 10-Year (Jan 2024 Call) 6.7%

Too short call risk for me but seeing that rate on a AAA bond, exempt from state/ local tax, is something else.

I had already put in an order for some. I don't like the call features either, but I've pretty much given up in the last week. Right now I'm putting X into bonds like this and then I put an equal amount into the same duration(ish) treasuries. If rates rise, the GSEs are less likely to be called. If rates fall the value of the T's will rise. Blend the rates together to make the low rate T's look better.

 

[JC888]

Does anyone notice any big jump on overall corp bond yields since the longer treasury notes have skyrocketed past two weeks?
At current rate if I want to invest into 5 year to max 10 years which one is best to invest in treasury note vs A or above corp bonds? And why?

 

[copyright1997reloaded]

(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

What's that say to you? To me, it is yelling at my face that there is increased risk in those with significant real estate holdings or who have put a lot of money "to work" in low yielding investments.

Hey, I own stock in Prudential, but the fact that they need to pay 5.75% isn't a good sign for me (as an equity owner in the company).

 

[pb4uski]

...Hey, I own stock in Prudential, but the fact that they need to pay 5.75% isn't a good sign for me (as an equity owner in the company).

Would you feel worse if they need to pay 6.75%?

 

[copyright1997reloaded]

Would you feel worse if they need to pay 6.75%?

I had it right when I first typed it in, then ended up erasing it (by mistake).

It doesn't help I use three different laptops with different placements of the trackpad.

 

[Montecfo]

Yes the rate action has been disappointing compared to Treasuries.

As jobs ease further rates will. These do not seem to wish to rise.

 

[imbatman]

Honestly, as the higher credit rated corporate issues have been pretty stable, I have been moving some of my taxable purchases (in nontaxable accounts) to taxable munis (ex. this week Virginia had a new issue AAA 6.534% 30-Yr with 9 year call).....while best new corporate I see is 78014RQT0 from Royal Bank Canada A1 at 6.3% for 10-Yr with 3 year call. Not bad but I am more worried about rates falling and getting called than I am rates rising and staying higher for a long time. I have no crystal ball so who knows. Generally GSEs aren't issuing competitive long-dated call items at all (everything has 2024 call dates).

 

[copyright1997reloaded]

Honestly, as the higher credit rated corporate issues have been pretty stable, I have been moving some of my taxable purchases (in nontaxable accounts) to taxable munis (ex. this week Virginia had a new issue AAA 6.534% 30-Yr with 9 year call).....while best new corporate I see is 78014RQT0 from Royal Bank Canada A1 at 6.3% for 10-Yr with 3 year call. Not bad but I am more worried about rates falling and getting called than I am rates rising and staying higher for a long time. I have no crystal ball so who knows. Generally GSEs aren't issuing competitive long-dated call items at all (everything has 2024 call dates).

An alternative to new issues in the 6+ range would be to pick up on the secondary issues done earlier in the year. For example, the Royal Bank Of Canada (RBC) 5.2% of 1/31/2033, first callable 1/28/2028 (5 years after issue) is trading w/about a 6%-6.2% yield.

Doing something like this would give you a little downdraft in yield protection, and if they get called in 4 1/2 years oh well.

 

[COcheesehead]

3130AXGD4 Agency 7% yield, call window starts in late January

 

[imbatman]

I'll pass for 3 months but still that is quite a sight to see, if you had asked me two years ago if we would see 7% AAA rated notes, I would have laughed.

 

[COcheesehead]

I'll pass for 3 months but still that is quite a sight to see, if you had asked me two years ago if we would see 7% AAA rated notes, I would have laughed.

I bought some. Even if called that is superior short term yield for an AA+ investment.

 

[pb4uski]

Honestly, as the higher credit rated corporate issues have been pretty stable, I have been moving some of my taxable purchases (in nontaxable accounts) to taxable munis (ex. this week Virginia had a new issue AAA 6.534% 30-Yr with 9 year call).....while best new corporate I see is 78014RQT0 from Royal Bank Canada A1 at 6.3% for 10-Yr with 3 year call. Not bad but I am more worried about rates falling and getting called than I am rates rising and staying higher for a long time. I have no crystal ball so who knows. Generally GSEs aren't issuing competitive long-dated call items at all (everything has 2024 call dates).

No dry powder right now but I should add taxable munis to my search criteria.

 

[jldavid47]

Well, I saw this 20-year agency bond this morning I couldn't resist so I bought a bit (2% slice in my IRA):

FEDERAL FARM CR BKS 6.85% 10/16/2043 Callable
CUSIP: 3133EPYD1
Coupon: 6.85%, payable semi-annually
Settlement date: 10/16/23
First call date: 10/16/24 (continuously callable after that)
Purchase price: 99.85 (for a YTM of 6.864%)

I don't expect it to "live" 20 years (not even sure if I will live another 20 years lol), but I'll take 6.85% for even a year.

 

[pb4uski]

Yeah, it is hard to decide whether the spreads between callable and non-callable bonds are attractive enough to jump. I try to keep a balance of the two. Currently about 50/50 for me.

But 6.85% is pretty juicy, even if only for a year.

 

[jldavid47]

Yeah, it is hard to decide whether the spreads between callable and non-callable bonds are attractive enough to jump. I try to keep a balance of the two. Currently about 50/50 for me.

But 6.85% is pretty juicy, even if only for a year.

It's only a 2% slice in my IRA so if I'm "wrong" (by whatever definition you want) it's no big deal.

 

[imbatman]

Based on the bids of other similar agencies in secondary market today (6.5-6.6%), you could likely offload for a small profit (plus interest earned) if better options become available. A full year before call makes this one pretty tempting to me to for specific use cases.

 

[MercyMe]

3130AXGD4 Agency 7% yield, call window starts in late January

Looks like this doesn't close for a few more weeks. If I buy now at at Fido, will the funds be taken from my MM account immediately and sit without earning any interest until the settlement date on the bond?

 

[imbatman]

No, you will earn whatever you earn in your money market at Fido until the fill date

 

[pb4uski]

Based on the bids of other similar agencies in secondary market today (6.5-6.6%), you could likely offload for a small profit (plus interest earned) if better options become available. A full year before call makes this one pretty tempting to me to for specific use cases.

Actually, interesting point. I could swap some bonds that mature in a year for this 6.85% issue and come out ahead. Probably little risk. If rates go up then I still keep on collecting 6.85%. If rates decline then it will probably stay near par because of a likely call at 100 and I'll continue to collect 6.85%.

Under what scenario would I lose if it is in my 2024 rung?

 

[COcheesehead]

Looks like this doesn't close for a few more weeks. If I buy now at at Fido, will the funds be taken from my MM account immediately and sit without earning any interest until the settlement date on the bond?

It’s an offer of only $30,000,000 so don’t wait too long. I’ve seen the higher coupon ones sell out early.

 

[MercyMe]

It’s an offer of only $30,000,000 so don’t wait too long. I’ve seen the higher coupon ones sell out early.

It's close to sold out. I couldn't even buy $50k.

 

[imbatman]

yeah the 7% and 6.85% went quick this afternoon, I couldn't even manage to move a few things around quick enough to get those 6.85% everywhere I was going to use them. Oh well, sure there will be a fire sale somewhere next week.

 

[MercyMe]

I hope so. If you find anything, please post it here.

 

[COcheesehead]

yeah the 7% and 6.85% went quick this afternoon, I couldn't even manage to move a few things around quick enough to get those 6.85% everywhere I was going to use them. Oh well, sure there will be a fire sale somewhere next week.

I got $55,000 yesterday of the 7% one and went back today for more. Got nut’n.