Corporate Bonds vs Municipal Bonds

[ducky911]

this is no doubt more risky but I been liking it. fees 1.09 ouch by far my highest.

PIMCO Income Fund Institutional Class PIMIX
Multisector Bond

 

[pb4uski]

No junk bonds at all. BBB is the lowest they go and no more than 60% will be BBB.

What is the duration and market yield of the sample portfolios?

 

[Dash man]

What is the duration and market yield of the sample portfolios?

We’re looking at a 3-7 year ladder.

ETA: This was a January 2021 portfolio, so it does not reflect the recent rise in rates.

 

[Mr._Graybeard]

this is no doubt more risky but I been liking it. fees 1.09 ouch by far my highest.

PIMCO Income Fund Institutional Class PIMIX
Multisector Bond

I had a position in PIMIX for a number of years, and they did quite well with interest rate swaps. They aren't into derivatives so much anymore and their monthly payout has dropped -- occurring at the same time they raised their management fee, in fact. I didn't see where they deserved a reward for reducing their yield, so I dropped them at the beginning of the year.

 

[pb4uski]

We’re looking at a 3-7 year ladder.

ETA: This was a January 2021 portfolio, so it does not reflect the recent rise in rates.

View attachment 38573

Doesn't make sense that current yield is 3.13% and YTM is lower... perhaps what they refer to as current yield is the coupon.

 

[Dash man]

Doesn't make sense that current yield is 3.13% and YTM is lower... perhaps what they refer to as current yield is the coupon.

Yes, I’m pretty sure it is. Prices were higher then than they are now, so YTM should be better.

 

[njhowie]

Doesn't make sense that current yield is 3.13% and YTM is lower... perhaps what they refer to as current yield is the coupon.

Current yield higher than YTM reflects that the mark to market of the bonds is above face value (of 100.0). Current yield is the coupon at the mark to market price. The lower YTM reflects that the premium will be lost as the bond approaches maturity.

So, for example, a 7% bond with current market value of 150 maturing May 1, 2030 will have a current yield of 4.66% with YTM of 1.15%.

 

[Dash man]

So we went with the 3-7 year taxable bond strategy. Maybe I’ll post the trades here over the next couple of months if anyone is interested.

 

[njhowie]

So we went with the 3-7 year taxable bond strategy. Maybe I’ll post the trades here over the next couple of months if anyone is interested.

I'd be very interested in seeing the trades.

Thanks.

 

[pb4uski]

Current yield higher than YTM reflects that the mark to market of the bonds is above face value (of 100.0). Current yield is the coupon at the mark to market price. The lower YTM reflects that the premium will be lost as the bond approaches maturity.

So, for example, a 7% bond with current market value of 150 maturing May 1, 2030 will have a current yield of 4.66% with YTM of 1.15%.

I get it, just have trouble seeing any relevance of the 4.66% since the value will eventually decay from 150 to 100 the 1.15% is more relevant for a hold-to-maturity investor.

 

[Dash man]

First Bond Trades for managed account

For those interested, here are the bonds that were recently purchased in my managed account:

Symbol Description Price

00287YBF5 ABBVIE INC. 4.25%28 DUE 11/14/28 $115.06

03522AAG5 ANHEUSER-BUSCH C 3.65%26 DUE 02/01/26 $110.58

037833AS9 APPLE INC. 3.45%24 DUE 05/06/24 $108.81

00206RDQ2 AT&T INC. 4.25%27 DUE 03/01/27 $112.94

14040HCA1 CAPITAL ONE FINL 3.9%24 DUE 01/29/24 $108.65

20030NCT6 COMCAST CORP 4.15%28 DUE 10/15/28 $115.48

126650CW8 CVS HEALTH CORP 4.1%25 DUE 03/25/25 $111.21

25389JAR7 DIGITAL REALTY TR 3.7%27 DUE 08/15/27 $110.57

46625HRV4 JPMORGAN CHASE & 2.95%26 DUE 10/01/26 $107.41

49456BAP6 KINDER MORGAN, IN 4.3%28 DUE 03/01/28 $112.81

548661DX2 LOWE'S COMPANIES, 1.3%28 DUE 04/15/28 $96.25

58013MFN9 MCDONALD'S CORP 3.3%25 DUE 07/01/25 $108.78

61746BDQ6 MORGAN STANLEY 3.875%24 DUE 04/29/24 $109.05

68389XBT1 ORACLE CORP 2.5%25 DUE 04/01/25 $105.13

747525AU7 QUALCOMM INC 3.25%27 DUE 05/20/27 $110.41

913017CR8 RAYTHEON TECHNO 3.125%27 DUE 05/04/27 $108.42

87612EBE5 TARGET CORP 2.5%26 DUE 04/15/26 $106.92

097023CT0 THE BOEING CO 4.875%25 DUE 05/01/25 $112.27

38145GAH3 THE GOLDMAN SACHS 3.5%26 DUE 11/16/26 $108.56

501044DE8 THE KROGER CO. 2.65%26 DUE 10/15/26 $106.51

254687FV3 THE WALT DISNEY 1.75%26 DUE 01/13/26 $102.75

883556CF7 THERMO FISHER S 4.133%25 DUE 03/25/25 $111.43

902494AX1 TYSON FOODS, INC 3.95%24 DUE 08/15/24 $109.40

91324PCP5 UNITEDHEALTH GRO 3.75%25 DUE 07/15/25 $111.08

92343VER1 VERIZON COMMUNI 4.329%28 DUE 09/21/28 $115.58

94974BGA2 WELLS FARGO & CO 3.3%24 DUE 09/09/24 $108.00

 

[njhowie]

Thanks for that. It's interesting seeing what they picked. You didn't post the amount of each bond purchased, so I wasn't able to match them up with market trade data - I was interested in seeing if the price they charged you was marked up by some amount.

I popped it all in to the Fidelity price/yield calculator and the average YTM is 1.462%. That is just a straight raw average taking the YTM of each bond. To be more useful, I'm guessing it should be weighted by maturity. There are a few I wouldn't personally have purchased at both the high and low yields, but aside from that, it looks like a good mix considering what's available today.

 

[Dash man]

Thanks for that. It's interesting seeing what they picked. You didn't post the amount of each bond purchased, so I wasn't able to match them up with market trade data - I was interested in seeing if the price they charged you was marked up by some amount.

I popped it all in to the Fidelity price/yield calculator and the average YTM is 1.462%. That is just a straight raw average taking the YTM of each bond. To be more useful, I'm guessing it should be weighted by maturity. There are a few I wouldn't personally have purchased at both the high and low yields, but aside from that, it looks like a good mix considering what's available today.

I guess I can post more info for you.

I've uploaded another spreadsheet.

 

[53anddone]

I own lots of Munis but have not bought any since the crash of 2020. As other have noted, the yields are just miserable at the moment. I have been buying dividend paying stocks and preferreds stocks lately .

 

[jr6035]

Another good bond or CD substitute are target maturity bond funds. Invesco has corporate and municipal versions. The 2026 maturty yield about 1.5% for the corporate version and 0.95% for the muni version.

Check out Ishares Ibond Target date maturity Etf's.