I am a secondary market brokered CD convert

[audreyh1]

Wow, again!

 

[HenryD]

Now I'm curious to see if my callable ones will in fact get called. I appreciate the OPs description of the terms because I wasn't particularly paying attention to them, mostly just the maturity dates. I paid par for all of them because I am not as smart as most of you on this thread, lol.

$87k, maturity 7/28/24, 5.5% at maturity, next callable 2/28/24, YTC 11.310%, YTW 6.097%.
$90k, maturity 8/7/24, 5.35% at maturity, non-callable.
$3k, maturity 10/28/24, 5.6% semi annually, next callable 2/28/24, YTC 11.601%, YTW 6.086%.
$3k, maturity 11/15/24, 5.6% semi annually, next callable 2/15/24, YTC 20.984%, YTW 6.062%.


These are in a taxable account - I thought that CD interest was taxable as ordinary income rather than LTCG?

 

[Golden sunsets]

The same LIVE OAK Bank CD is available: Cusip 538036VX9 ... 4.75% YTW 2032 maturity 3.65 coupon with $431,000 available. I bought some more this morning.[/QUOTe

Oh how I wish such a discount existed on a 5 year CD rather than an 8 year. I will keep checking. I have time.

 

[Earl E Retyre]

Now I'm curious to see if my callable ones will in fact get called. I appreciate the OPs description of the terms because I wasn't particularly paying attention to them, mostly just the maturity dates. I paid par for all of them because I am not as smart as most of you on this thread, lol.

$87k, maturity 7/28/24, 5.5% at maturity, next callable 2/28/24, YTC 11.310%, YTW 6.097%.
$90k, maturity 8/7/24, 5.35% at maturity, non-callable.
$3k, maturity 10/28/24, 5.6% semi annually, next callable 2/28/24, YTC 11.601%, YTW 6.086%.
$3k, maturity 11/15/24, 5.6% semi annually, next callable 2/15/24, YTC 20.984%, YTW 6.062%.


These are in a taxable account - I thought that CD interest was taxable as ordinary income rather than LTCG?

Yes, the CD interest will be taxable as ordinary income. You should not have any Capital Gains since you are paying at par. If you purchased at a discount then you would have a gain.

However, the part of the thread that discusses accrued interest and taxes would apply to you if these are secondary market CDs. If you are buying new CDs then you can ignore that too. But if they are secondary market CDs then you should account for the accrued interest or else you will be overpaying taxes.

As far as being called, it looks like you are buying short term CDs. Currently, brand new CDs in the 6 months range are going for about 5%. So, if you are getting 5.5% then that may be close enough where it does not get called.

I am not sure how you are getting a YTM of 5.5% and a YTW of 6.097%. Assuming you are paying at par then YTM and YTW should be the same as I understand it.

 

[Earl E Retyre]

The same LIVE OAK Bank CD is available: Cusip 538036VX9 ... 4.75% YTW 2032 maturity 3.65 coupon with $431,000 available. I bought some more this morning.[/QUOTe

Oh how I wish such a discount existed on a 5 year CD rather than an 8 year. I will keep checking. I have time.

I used to say to myself that I did not want to go further than 5 years since that seems like a very long time and what if interest rates go way above 5% and I made the mistake of locking in a low rate. But since I have not seen 5% (long term) in so long, and had been getting a measly 3.25% for so long, and I am OK with it. Time will tell whether these are good buys or not.

 

[pdxgal]

YCurrently, brand new CDs in the 6 months range are going for about 5%. So, if you are getting 5.5% then that may be close enough where it does not get called.

Interesting and informative thread, thanks to OP. Would you mind sharing the online calculators that let you compare YTC to YTW, etc.? Would save some googling

I just got an alert from Fidelity that JP Morgan is calling my 9 month 5.5% CD that matures 6/6/24.

 

[Earl E Retyre]

Interesting and informative thread, thanks to OP. Would you mind sharing the online calculators that let you compare YTC to YTW, etc.? Would save some googling

I just got an alert from Fidelity that JP Morgan is calling my 9 month 5.5% CD that matures 6/6/24.

Here are some links you can use:
(1) The following link explains all of it and gives you detailed instructions to put a formula in a spreadsheet:
https://www.wallstreetprep.com/knowledge/yield-to-worst-ytw//

(2) The following link is an online calculator computing YTM:
https://dqydj.com/bond-yield-to-maturity-calculator/

(3) The following link is an online calculator computing YTC:
https://dqydj.com/bond-yield-to-call-calculator/

 

[zaqxsw]

Then I found an online calculator and plugged in the same CD values, and it returned the same YTC, YTM, YTW numbers as my spreadsheet.

What online calculator? Thanks!

 

[Earl E Retyre]

What online calculator? Thanks!

2) The following link is an online calculator computing YTM:
https://dqydj.com/bond-yield-to-maturity-calculator/

(3) The following link is an online calculator computing YTC:
https://dqydj.com/bond-yield-to-call-calculator/

 

[zaqxsw]

Thank you!

 

[hpnutty]

Thanks so much for the tip on accrued interest. Here is the great bogleheads thread about taxation of treasuries, how the various brokers report it and what to do in turbotax:

https://www.bogleheads.org/forum/viewtopic.php?t=390405

Fortunately all my purchased taxable 2023 treasuries were zero coupon but I did purchase one this year with accrued interest. So I added a note with the page above saved to get it right in TT for 2024.