Fixed Income Investing II

[Koolau]

yup, sorry not drinking the "we reinvest all those profits to give you miracle cures" Kool-Aid, IMO (not worth anything) the only people benefitting from the US health care system are pharma companies and for-profit hospitals and care centers

So I assume a large portion of your portfolio is invested in Pharma, medical device companies, for profit hospitals, and other USA based health-care companies. Otherwise, what flavor of Kool-Aid do you like?

 

[imbatman]

Actually my friend, I am a big fan of MDT and PFE, still holding some CVS, and sold some WBA in the last week. All good profit / dividend generators. BMRN and INCY starting to look interesting lately (but no dividends). I don't hate the players (they can make me $$ too), I hate the game.

Ho’omaika’i Ke La!

 

[Koolau]

Actually my friend, I am a big fan of MDT and PFE, still holding some CVS, and sold some WBA in the last week. All good profit / dividend generators. BMRN and INCY starting to look interesting lately (but no dividends). I don't hate the players (they can make me $$ too), I hate the game.

Ho’omaika’i Ke La!

Gotta admit that the game stinks - mostly because the USA is "free" enterprise and most other countries restrict prices of otherwise profitable drugs and procedures, primarily from USA research and development. That puts the biggest burden on USA purchasers of health care. But that's the game we have, so we have to back ourselves up by purchasing the stock of the "evil" pharma/healthcare giants.



Make your day good as well.

 

[jazz4cash]

Can someone explain the call provision for this issue from J&J CUSIP 478160AL8? At Fidelity the Next Call Date column says ‘View’ but there is no info when I click it.

 

[COcheesehead]

Can someone explain the call provision for this issue from J&J CUSIP 478160AL8? At Fidelity the Next Call Date column says ‘View’ but there is no info when I click it.

See the prospectus. It has conditional calls.
The bond isn’t overly attractive.

 

[disneysteve]

I asked this in another thread but didn’t get a reply.

I have an account with Schwab and our TD accounts recently merged there as well. I've never done a lot with either but I was just looking to pick up an agency bond in my account. I pulled up the rate grid on Vanguard's site. I then looked on Schwab for the same bonds that were listed at Vanguard, searching by CUSIP, and none were available. The best rate on a 1-year non-callable agency bond at VG is 5.912%. At Schwab, the best rate they're showing is 5.369%.

Am I doing something wrong or is it common for one brokerage to have bonds that aren't available from another brokerage?

 

[jazz4cash]

See the prospectus. It has conditional calls.

The bond isn’t overly attractive.

Thanks. Where do I find the prospectus? I might like to own some J&J debt.

 

[pb4uski]

+1 My weighted average maturity right now is 2.5 and I'd like to extend it to 3.5 or more... ultimately perhaps even 5.0 if we get a positive yield curve... as I reinvest the proceeds of maturities. If I had an evenly balanced 7 year ladder, I'm way overweight in 2023 to 2025 maturities and underweight in 2026 to 2030 maturities, meaning that I should be reinvesting proceeds in 2026-2030 maturities. Right now, I can find decent GSE offerings that mature in 2026-2030 in the 5-6% YTM, but a lot of them are callable and I'm trying to manage my call risk as well.

Right now I'm about 50% callable and want to stay at 50% or less, but if a callable will pay me a 150 bps premium then I'm inclined to take the risk.

Over the last week of so I have sold a lot of 2024 and 2025 maturities and reinvested in 2026-2028 maturities, making the rungs of my ladder close to equal for 2024-2028. Since I was previously skewed to 2023-2025, it increased my weighted average maturity from 2.5 years to 3.1 years. My weighted average yield is 5.4% so I'm happy with that. 96% investment grade and 90% A or better.

I still have a lot of 2023 maturities that I will reinvest but the pricing if I sell them now is really unattractive... I can wait patiently for a few months and reinvest the proceeds in 2029-2030 maturities.

I'm still about 57% callable, but some of the callables are lower coupon so unlikely to be called.

 

[COcheesehead]

Thanks. Where do I find the prospectus? I might like to own some J&J debt.

It should be a link in issuer events. FINRA has a lot of info too.

 

[finvest2]

Am I doing something wrong or is it common for one brokerage to have bonds that aren't available from another brokerage?

Pretty common, I use Vanguard and usually the CUSIPs people list here from Fido/Schwab aren't available on Vanguard.

 

[Healthy Lifestyle]

Pretty common, I use Vanguard and usually the CUSIPs people list here from Fido/Schwab aren't available on Vanguard.

Add Merrill Edge to that list.

 

[imbatman]

Yup, I don't know how someone does much bond investing at ML, it is an archaic horrible experience.

 

[Healthy Lifestyle]

Yup, I don't know how someone does much bond investing at ML, it is an archaic horrible experience.

True, I rolled over my 401k plan to Merrill Edge but at some point will transfer to Fid. or Van.

 

[Montecfo]

Pb4uski,

Good job on extending duration.
Did you have to record losses on your sales?

Hopefully taxable if so.

 

[imbatman]

I have been doing the same as pb4uski, and yes, the ability to get a tax loss adds to the incentive for me. In most cases by the time I get my earned interest and tax loss, I still made a nice little earning while being able to lock in much higher longer term rates.

 

[pb4uski]

Pb4uski,

Good job on extending duration.
Did you have to record losses on your sales?

Hopefully taxable if so.

Thanks. Most, perhaps even all, were sold at a small loss (0.9%) but they were all tax-deferred so any loss didn't bother me. I sort of kept an eye on the YTM of the sale and tried to invest in similar YTM for the buy side, and actually did a little better overall which helped increase the portfolio YTM a tad.

IOW, as an example, if I could sell a 2025 maturity at a 5.7% YTM and turnaround and buy a 2028 maturity at a 5.7% YTM then I am fine with that since I am maintaining yield but lengthening duration and balancing out my ladder better.

One other thing that I noticed and changed just this morning in my metrics is that I have a number of callables with coupons that are significantly below current rates for that CUSIP...like 1.35% (2030), 3.15% (2024), 3.00% (2029), 3.50% (2029), 3.60% (2024) and 3.78% (2028) that I think are unlikely to get called so I made a judgement call to categorize the CUSIP as non-callable for my metrics. In all cases they are over 200 bps below the current YTM for those issues.

Below is my Maturity Distribution after this weeks trades. While I've explored sellinsome 2023 maturities to buy 2029 and later, the pricing is horrible so I'll just wait for them to mature. The Target is based on a 7-year ladder/3.5 year weighted average term to maturity and is 2/12 of 14.3% for 2023, 14.3% for 2024-2028 and 10/12 of 14.3% for 2029... but as a practical matter I include everything for 2030 and after and any perpetual preferreds in 2030 in the back of my mind.

Still learning and having fun.

 

[Texas Proud]

Yup, I don't know how someone does much bond investing at ML, it is an archaic horrible experience.

True, I rolled over my 401k plan to Merrill Edge but at some point will transfer to Fid. or Van.

Never tried to buy bonds there, but the site and the people I dealt with did not seem that helpful... so moved my account that was less than a year old to Schwab...

 

[Texas Proud]

Thanks. Most, perhaps even all, were sold at a small loss but they were all tax-deferred so any loss didn't bother me. I sort of kept an eye on the YTM of the sale and tried to invest in similar YTM for the buy side, and actually did a little better overall which helped increase the portfolio YTM a tad.

IOW, as an example, if I could sell a 2025 maturity at a 5.7% YTM and turnaround and buy a 2028 maturity at a 5.7% YTM then I am fine with that since I am maintaining yield but lengthening duration and balancing out my ladder better.

One other thing that I noticed and changed just this morning in my metrics is that I have a number of callables with coupons that are significantly below current rates for that CUSIP...like 1.35% (2030), 3.15% (2024), 3.00% (2029), 3.50% (2029), 3.60% (2024) and 3.78% (2028) that I think are unlikely to get called so I made a judgement call to categorize the CUSIP as non-callable for my metrics. In all cases they are over 200 bps below the current YTM for those issues.

Below is my Maturity Distribution after this weeks trades. While I've explored sellinsome 2023 maturities to buy 2029 and later, the pricing is horrible so I'll just wait for them to mature. The Target is based on a 7-year ladder/3.5 year weighted average term to maturity and is 2/12 of 14.3% for 2023, 14.3% for 2024-2028 and 10/12 of 14.3% for 2029... but as a practical matter I include everything for 2030 and after and any perpetual preferreds in 2030 in the back of my mind.

Still learning and having fun.

With the yield curve pretty flat out a few years it does not appear to be a stretch to get similar YTM... I have gone out to 20 plus years on a good amount of mine...

 

[disneysteve]

Pretty common, I use Vanguard and usually the CUSIPs people list here from Fido/Schwab aren't available on Vanguard.

Thanks. I found just the opposite. Vanguard’s choices were much better than Schwab’s.

 

[Mulligan]

Pretty common, I use Vanguard and usually the CUSIPs people list here from Fido/Schwab aren't available on Vanguard.

If there is something really exciting your investing loins, you can call into their fixed income dept and ask for a fixed income expert. They are pretty good at reaching out to 3rd party desks to get you a quote. I have bought several delisted and $1000 preferreds from Vanguard via 3rd party bond desks that are not offered online.

 

[Echard]

The biggest challenge I have in managing my bond ladder is the fact that I have about 65% in individual bonds/CD's, and 35% in bond ETF's. Since there isn't a true maturity date for the ETF's, I approximate it by sticking the whole ETF value in the year to maturity date. As for the income, I struggle to model the yearly income estimate for the ETF's. The bonds are obviously easy to model. Anyone have any ideas?

 

[pb4uski]

Dump the bond ETFs.

 

[JBTX]

Had been recently buying additional TIPS etfs. Now with real rates at around 2.5% I’m building a TIPS ladder, starting with longest durations first. At 2.5% real the TIPS will roughly double in around 25 years. When completed it will probably be around 15% of our portfolio

 

[COcheesehead]

The biggest challenge I have in managing my bond ladder is the fact that I have about 65% in individual bonds/CD's, and 35% in bond ETF's. Since there isn't a true maturity date for the ETF's, I approximate it by sticking the whole ETF value in the year to maturity date. As for the income, I struggle to model the yearly income estimate for the ETF's. The bonds are obviously easy to model. Anyone have any ideas?

If you use Fidelity, a combination of their fixed income analysis report and the portfolio dividend view would give you all the visibility you’d need.

 

[jldavid47]

Dump the bond ETFs.

+1