We are entering a "Golden Period" for fixed income investing

[copyright1997reloaded]

I did not think this type of trading would help you..Why would someone buy your UST or GSE bond instead of buying a C.D.?

I've explained this over a number of posts, both here and in the CD thread. Here's a list of some of the differences:

1) If you have a lot of money to invest (e.g. $100 million), it is not feasible to buy CD's and still get FDIC insurance protection.
2) Given 1), Treasuries can be seen as lower risk vs. uninsured CD's.
3) There may be a perceived higher risk given CD's are backed by the FDIC insurance fund (but not a direct obligation of the US treasury).
4) (I haven't mentioned this before). Treasuries can be margined and can be used as collateral.
5) Many banks are scrambling for funds and thus must offer higher returns than "risk free" treasuries.
6) Whenever there is a flight to safety, the easiest and most liquid market is treasuries, thus the initial rush of capital will go there.
7) In contrast, the market for CD's has many many individual issues w/a variety of term sheets. The result of this is a market much less liquid.


Hope this helps.

 

[Dtail]

High Net worth Bond Desk. This is Fidelity's term for anyone who holds $3M or more in individual bonds, CDs, treasuries, in their portfolio.

So yes jumbo CD's for 100k plus, but forgot to add the 3m part.

 

[lawman]

I've explained this over a number of posts, both here and in the CD thread. Here's a list of some of the differences:

1) If you have a lot of money to invest (e.g. $100 million), it is not feasible to buy CD's and still get FDIC insurance protection.
2) Given 1), Treasuries can be seen as lower risk vs. uninsured CD's.
3) There may be a perceived higher risk given CD's are backed by the FDIC insurance fund (but not a direct obligation of the US treasury).
4) (I haven't mentioned this before). Treasuries can be margined and can be used as collateral.
5) Many banks are scrambling for funds and thus must offer higher returns than "risk free" treasuries.
6) Whenever there is a flight to safety, the easiest and most liquid market is treasuries, thus the initial rush of capital will go there.
7) In contrast, the market for CD's has many many individual issues w/a variety of term sheets. The result of this is a market much less liquid.


Hope this helps.

It does. Thanks..Now I just need to figure out if I can benefit from this and if so, how..

 

[Quattro73]

Zions 5.4 18 months….

Obviously, they have been embroiled in the regional bank issues. And don’t want to deal with a problem even if under FDIC limits, but enticing….

 

[Quattro73]

Sorry see this in CD thread.

 

[ut2sua]

No offense at all to you Freedom, but I find this frustrating... it's a teeny, tiny example of how the rich get richer. I have $3M with Fido but half is in equity funds, but no love from them in terms of getting special discounts on CD's.

Don't worry. Be happy.
MM, don't let this ruin your day. The amount was at the noise level in your portfolio. Be happy that CD rate has improved from ~2.5% to ~5%.
I think Freedom deserved the extra for all his free work here to benefit the rest of us (don't you think?) I am happy for him

 

[dobig]

Question. If we buy 4 Zion(or any other bank) CDs for $250,000 each thru Fidelity, would we be FDIC covered for $1 million or only $250,000? Or is the $250,000 the total amount we're FDIC insured at Fidelity no matter the investment?

 

[Car-Guy]

If you buy 4 separate 250k CD's from the "same bank", you will only get 250k coverage.

Unless Janet decides to cover you.

 

[Free bird]

$250k per person per bank

 

[ut2sua]

Question. If we buy 4 Zion(or any other bank) CDs for $250,000 each thru Fidelity, would we be FDIC covered for $1 million or only $250,000? Or is the $250,000 the total amount we're FDIC insured at Fidelity no matter the investment?

In the case above, only $250K is covered UNLESS you buy each CD in different accounts that are classified as "different type" (I don't remember the exact wording) for FDIC purpose. Some examples: an account owns by 1 individual is defined to be different from a joined account. I believe a 3rd account type would be IRA.

 

[Graybeard]

Can you purchase the CD’s in off hours?

I'd like to know as well.

Never done it but I think you can since for new issue CDs you are not so much buying them as putting in an order to buy them when they are issued.

Yes, I have bought CDs before and after market close at Vanguard so I assume you can at any brokerage.

 

[ut2sua]

Yes, I have bought CDs before and after market close at Vanguard so I assume you can at any brokerage.

Thanks for this ^^^ info. I was able to place some orders at Fido after hours for CDs

 

[dobig]

Appreciate the replies clarifying FDIC limits.

 

[Chuckanut]

City Bank of LA has 3yr at 5.1% noncallable and 5yr at 5.0% noncallable at Vanguard

I believe the 5 year is also at Schwab.

 

[Dream Weaver]

I've explained this over a number of posts, both here and in the CD thread. Here's a list of some of the differences:

1) If you have a lot of money to invest (e.g. $100 million), it is not feasible to buy CD's and still get FDIC insurance protection.
2) Given 1), Treasuries can be seen as lower risk vs. uninsured CD's.
3) There may be a perceived higher risk given CD's are backed by the FDIC insurance fund (but not a direct obligation of the US treasury).
4) (I haven't mentioned this before). Treasuries can be margined and can be used as collateral.
5) Many banks are scrambling for funds and thus must offer higher returns than "risk free" treasuries.
6) Whenever there is a flight to safety, the easiest and most liquid market is treasuries, thus the initial rush of capital will go there.
7) In contrast, the market for CD's has many many individual issues w/a variety of term sheets. The result of this is a market much less liquid.


Hope this helps.

8) Treasuries are also exempt from state tax and local taxes. This can give them a winning edge over slightly higher % CDs especially for those living in high tax states and/or with higher income levels.

 

[MMxyz74]

I'm new to buying brokered CD's and Notes. Have some T-Bills maturing next week. What are your thoughts on this note I saw on Fidelity this morning?

MANUFACTURERS &TRADERS TR CO NOTE
Credit Ratings: A3 / A-
Sector: Bank
Cusip: 55279HAW0
Coupon: 4.700
Price: $93.397
Yield to Worst: 6.307%
Maturity Date: 01/27/2028
Call Date: 12/28/2027
Min Qty: 250

 

[Rianne]

Well during the prior week, I bought $2.2M in CDs without any discounts in our accounts as well as my parent's account that I manage. The new advisor assigned to my account reached out to me yesterday morning and mentioned that with the volume CDs that I was buying, I should be dealing with the HNBD for discounts. So she put me in touch with the person assigned to our area for high net worth fixed income investors. He offered me the $500 discount per $100K buy on a single jumbo CD and I accepted. Fidelity receives about .75% to 1% commission for selling CDs from the bank so giving me $500 is a drop in the bucket given how much I purchased during the prior week.

If I may ask, are these long-term, short-term, or laddered?

 

[copyright1997reloaded]

I'm new to buying brokered CD's and Notes. Have some T-Bills maturing next week. What are your thoughts on this note I saw on Fidelity this morning?

MANUFACTURERS &TRADERS TR CO NOTE
Credit Ratings: A3 / A-
Sector: Bank
Cusip: 55279HAW0
Coupon: 4.700
Price: $93.397
Yield to Worst: 6.307%
Maturity Date: 01/27/2028
Call Date: 12/28/2027
Min Qty: 250

Not FDIC insured (hopefully you were already aware of this).
Unlikely to be called at current rates, if rates drop a lot and called you should be happy given the yield to worst.

Will drop further if bank issues intensify, especially if M&T Bank appears to be "at risk". M&T Bank common (MTB) has fallen from a 52 week high of $193.42 to $114.93 on Friday (hit a 52-week low under $110 in Friday's premarket trading). Thus, the higher YTM on these is due to perceived risk of the bank.

 

[COcheesehead]

I'm new to buying brokered CD's and Notes. Have some T-Bills maturing next week. What are your thoughts on this note I saw on Fidelity this morning?

MANUFACTURERS &TRADERS TR CO NOTE
Credit Ratings: A3 / A-
Sector: Bank
Cusip: 55279HAW0
Coupon: 4.700
Price: $93.397
Yield to Worst: 6.307%
Maturity Date: 01/27/2028
Call Date: 12/28/2027
Min Qty: 250

Their outlook was negative in 2022 and upgraded to stable. It’s not without some risk, but that’s were the higher yield comes into play.

 

[MercyMe]

Don't worry. Be happy.
MM, don't let this ruin your day. The amount was at the noise level in your portfolio. Be happy that CD rate has improved from ~2.5% to ~5%.
I think Freedom deserved the extra for all his free work here to benefit the rest of us (don't you think?) I am happy for him

I too am happy for Freedom. I didn't write anything to the contrary. And while I greatly appreciate the effort he puts into this thread (and have thanked him multiple times), this is not about him.

My point was that Fido gave him $500 on a $100k CD. For my $400k in CD's bought yesterday, that could have been $2,000. Two-thousand bucks just for being in the right place at the right time with the right Fido rep and the right portfolio. Apparently my $3M at Fidelity is meaningless and gives me no reason to bring over the rest of my accounts to them. Instead, Fidelity keeps calling me and asking the same questions over and over and over. And they keep changing my "dedicated" rep. (I've had four in 8 months.)

 

[Earl E Retyre]

If you buy 4 separate 250k CD's from the "same bank", you will only get 250k coverage.

Unless Janet decides to cover you.

I think it can be more than $250k if you have multiple categories invested in a bank.
For example, "Married couples will have another option for maximizing their FDIC insurance coverage. You and your spouse each can open individual accounts at a single bank, resulting in each of you having up to $250,000 FDIC-insured. You can then also open a joint account and each has $250,000 insured in that account. Between those three accounts, you could have up to $1 million FDIC-insured at one bank."

The categories are:
• Single accounts
• Certain retirement accounts
• Joint accounts
• Revocable trust accounts
• Irrevocable trust accounts
• Employee benefit accounts

See https://smartasset.com/checking-account/how-much-is-fdic-insurance

 

[Car-Guy]

^^^^^
Notice I said "you" and from the "same bank". That's assuming one person and one account. Which I think was the basis of his question. Sure they are lot's of ways to get creative and increase coverage amount.

To me, the easiest way to beat the FDIC limits are to just buy brokered CD's and be sure you don't exceed 250k (individually or in aggregate) at any one issuing bank. Very easy to have millions in coverage for one person and in one account.

 

[Earl E Retyre]

^^^^^
Notice I said "you" and from the "same bank". That's assuming one person and one account. Which I think was the basis of his question. Sure they are lot's of ways to get creative and increase coverage amount.

To me, the easiest way to beat the FDIC limits are to just buy brokered CD's and be sure you don't exceed 250k (individually or in aggregate) at any one issuing bank. Very easy to have millions in coverage for one person and in one account.

I agree. And, sorry Car-Guy, I did not mean to imply you did not know the rules. My intent of the post was to help the OP of the question, in case my added information helped him out.

 

[Car-Guy]

No problem.. I don't know everything. Matter of fact, there's tons of things I don't know.

 

[Freedom56]

I'm new to buying brokered CD's and Notes. Have some T-Bills maturing next week. What are your thoughts on this note I saw on Fidelity this morning?

MANUFACTURERS &TRADERS TR CO NOTE
Credit Ratings: A3 / A-
Sector: Bank
Cusip: 55279HAW0
Coupon: 4.700
Price: $93.397
Yield to Worst: 6.307%
Maturity Date: 01/27/2028
Call Date: 12/28/2027
Min Qty: 250

Banks will start reporting next month. The market knows that large depositors fled some regional banks for the larger banks. What we don't know is to what extent and what their current liquidity situation is in regional banks like M&T.