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

[Freedom56]

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

I bought 12,18,24,36,48, and 60 month CDs. A lot of it was shifting from MM funds to CDs and also selling 2 year treasuries for a gain and buying higher yielding CDs with the same and longer durations.

 

[lawman]

I bought 12,18,24,36,48, and 60 month CDs. A lot of it was shifting from MM funds to CDs and also selling 2 treasuries for a gain and buying higher yielding CDs with the same and longer durations.

I have treasuries I have a gain on. I wish I knew how to sell them without screwing up..Right now I feel C.D.'s are lower risk than treasuries. Do you?

 

[Freedom56]

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.)

Well $3M is well above the national average and also well above the average for Fidelity. Fidelity representative are sales people. Depending on how much cash you have sitting in MM funds, the level of attention increases. We have four people calling us from Fidelity. One tries to sell annuities and fails, another private real estate funds that we won't buy, a new one calling to see how we are doing. The local branch VP contacts us at least once a year to see if we have any issues or if we want them to manage the accounts so we could have more free time. This new fixed income person who gave us a discount on a transaction and told me to contact him when making large purchase. He also wanted to discuss premium fixed income services. These services obviously come with a fee. So there are always strings attached.

 

[Freedom56]

I have treasuries I have a gain on. I wish I knew how to sell them without screwing up..Right now I feel C.D.'s are lower risk than treasuries. Do you?

No the risk level is the same. CDs are subject to FDIC limits and in our case with $500K (two depositors) per institution per account, treasuries have no upper limit. So CDs require a little bit more management for large buys. Treasury interest is not taxable at the state and local level. A combination of factors, smaller banks requiring liquidity and a flight to safety trade has caused an unusual spread between treasuries and CDs which are normally about 40 basis points.

 

[Trailwalker]

Well $3M is well above the national average and also well above the average for Fidelity. Fidelity representative are sales people. Depending on how much cash you have sitting in MM funds, the level of attention increases. We have four people calling us from Fidelity. One tries to sell annuities and fails, another private real estate funds that we won't buy, a new one calling to see how we are doing. The local branch VP contacts us at least once a year to see if we have any issues or if we want them to manage the accounts so we could have more free time. This new fixed income person who gave us a discount on a transaction and told me to contact him when making large purchase. He also wanted to discuss premium fixed income services. These services obviously come with a fee. So there are always strings attached.

All of those people calling. I guess there's at least some benefit to being well below the radar. I am very grateful for this thread. I've learned a lot from it.

 

[ut2sua]

We have four people calling us from Fidelity. One tries to sell annuities and fails, another private real estate funds that we won't buy, a new one calling to see how we are doing. The local branch VP contacts us at least once a year to see if we have any issues or if we want them to manage the accounts so we could have more free time. This new fixed income person who gave us a discount on a transaction and told me to contact him when making large purchase. He also wanted to discuss premium fixed income services. These services obviously come with a fee. So there are always strings attached.

I have had similar experience. Fido reps were calling, emailing me multiple times wanting me to meet/talk to their local reps "as a free benefit provided by Fido". On their 3rd unscheduled phone call to my cell, I asked the rep to not contact me any more because I am fine investing my $ myself. They stopped calling me after that. I am happy to be left alone and I am fine with not having a dedicated rep even though I am a private client. It sounds to me like Freedom did have to pay for his extra after all
Nothing is really free after all.
Extra note: on the few occasions that I needed help, Fido reps were very helpful. They are first class in my opinion, so nothing against them.

 

[Freedom56]

I have had similar experience. Fido reps were calling, emailing me multiple times wanting me to meet/talk to their local reps "as a free benefit provided by Fido". On their 3rd unscheduled phone call to my cell, I asked the rep to not contact me any more because I am fine investing my $ myself. They stopped calling me after that. I am happy to be left alone and I am fine with not having a dedicated rep even though I am a private client. It sounds to me like Freedom did have to pay for his extra after all
Nothing is really free after all.
Extra note: on the few occasions that I needed help, Fido reps were very helpful. They are first class in my opinion, so nothing against them.

Fidelity is okay but most of these reps are still working from home as I hear dogs barking in the background when they call. During the call with the fixed income person at Fidelity last week I heard a baby crying in the background. The representative pushing the private real estate fund was a littler over the top. She was looking for a minimum $1M investment in a private fund that has a portfolio of commercial real estate. The fund is not liquid. She made it sound like it was an exclusive offer. It appears that Fidelity has their own version of BREIT.

Flying under the radar is more difficult these days. Banks and financial companies sell your information unless you opt out. So it's not by accident that at some point in your life you get unsolicited sales proposals from people you have never heard of or met. It gets worse as you get older as I have seen with my parents who are 87 and 88. This is why they handed power of attorney of all financial matters to me when they were in their 60's.

 

[Rianne]

Vanguard never calls us. I’m hurt. Our portfolio in same $ range.

If we bought treasuries earlier in 2022 when interest rates weren’t as good as they are now, and sold them say Monday. Would I lose interest or principle. I understand it’s what they’re selling or buying in that moment, but how can I tell? I’ve never sold before maturity. Do I have to speak with the bond desk or can I sell them myself. So, example one of the treasuries pays 2.5% and I sell on Monday they buy CDs at 5%. Is that what you smart bond traders do?

 

[Montecfo]

I have had similar experience. Fido reps were calling, emailing me multiple times wanting me to meet/talk to their local reps "as a free benefit provided by Fido". On their 3rd unscheduled phone call to my cell, I asked the rep to not contact me any more because I am fine investing my $ myself. They stopped calling me after that. I am happy to be left alone and I am fine with not having a dedicated rep even though I am a private client. It sounds to me like Freedom did have to pay for his extra after all

Nothing is really free after all.

Extra note: on the few occasions that I needed help, Fido reps were very helpful. They are first class in my opinion, so nothing against them.

Not a fan of Fido as read too many cust svc threads. But my DAF is there.

The rest is at E-Trade, now owned by Morgan Stanley. Never long holds, they respect my $value.

And zero calls to sell me stuff.

 

[ut2sua]

So, example one of the treasuries pays 2.5% and I sell on Monday they buy CDs at 5%. Is that what you smart bond traders do?

This is my understanding: It doesn't matter what the coupon of your treasury is . When you submit a "sell", Fido will let you know what effective interest rate the buyer is getting from your treasury (around 4.4% for a 1 year maturity) based on your coupon rate and the selling price and other things. If a 1 year CD is showing 5.35% at that time, you will most likely benefit from a sell then buy trade. One benefit for me was to be able to trade for longer term CD at higher rate than my treasuries, but everyone's requirement is different. Keep in my you lose the State tax benefit treasuries give.

 

[ut2sua]

This is my understanding: It doesn't matter what the coupon of your treasury is . When you submit a "sell", Fido will let you know what effective interest rate the buyer is getting from your treasury (around 4.4% for a 1 year maturity) based on your coupon rate and the selling price and other things. If a 1 year CD is showing 5.35% at that time, you will most likely benefit from a sell then buy trade. One benefit for me was to be able to trade for longer term CD at higher rate than my treasuries, but everyone's requirement is different. Keep in my you lose the State tax benefit treasuries give.

The part that is missing from my previous post is: I normally already made a small profit on my treasuries when selling, then the above will apply. If you have a loss, the calculation will be more complicated since your principle will be reduced on a sale with a loss. Hope it is not too confusing.

 

[Car-Guy]

Schwab never calls me "anymore". I told my FA there, if I need him, I'll call. He sends me emails with current info about once a month, some of which is interesting, but most goes to e-trash. Usually, when I do need to contact Schwab, I just call customer services. They are always there with a live agent, have always been quick to get to talk to someone, knowledgeable, accurate and follow-up when necessary. Not bad for the price!

 

[Dtail]

I DIY at Fidelity. I have a rep and he never sells me anything. I can speak to many reps with many questions with no fees.

 

[pb4uski]

This is my understanding: It doesn't matter what the coupon of your treasury is . When you submit a "sell", Fido will let you know what effective interest rate the buyer is getting from your treasury (around 4.4% for a 1 year maturity) based on your coupon rate and the selling price and other things. If a 1 year CD is showing 5.35% at that time, you will most likely benefit from a sell then buy trade. One benefit for me was to be able to trade for longer term CD at higher rate than my treasuries, but everyone's requirement is different. Keep in my you lose the State tax benefit treasuries give.

That is exactly what I did this week. I went to "sell" each of my holdings and looked at the YTM based on the various bid prices displayed and the YTM of the best bid price for the quantity that I had to sell. If they YTM was 4.7% or less than I sold it and reinvested in 5%+ CDs of similar maturity since I didn't want to mess up my ladder. The added benefit was that many of my sales were GSE bonds that were callable and the CDs that I bought are not callable so my portfolio call risk is a lot lower too.

State taxes are not a consideration for me... no tax state and all the trades were in either a tIRA or a Roth IRA.

 

[Cat-tirement]

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

I have an IRA account at both Fidelity and Vanguard where I am buying CDs. If I buy $250K in CDs in both accounts that are issued by the same bank, am I covered for the full $500K? In other words, would the FDIC view these two IRAs as different account owners or types?

 

[Earl E Retyre]

I have an IRA account at both Fidelity and Vanguard where I am buying CDs. If I buy $250K in CDs in both accounts that are issued by the same bank, am I covered for the full $500K? In other words, would the FDIC view these two IRAs as different account owners or types?

I would not think so since they are the same category of an IRA. But I am not sure. Anyone else know?

 

[pb4uski]

I would not think so since they are the same category of an IRA. But I am not sure. Anyone else know?

I think that is right but the only way to know for sure is to use the tool on the FDICs website.

 

[Echard]

If you have a joint account with a brokerage, and invest in a brokered CD, is the coverage $250k or $500k?

 

[pb4uski]

If you have a joint account with a brokerage, and invest in a brokered CD, is the coverage $250k or $500k?

https://www.fdic.gov/resources/deposit-insurance/financial-products-insured/index.html

 

[lawman]

When determining if one can benefit from selling a treasury and buying a C.D. it occurs to me one would need to know the price he paid for the treasury, the price he would receive if he sold the treasury, the length of time he held the treasury, the rate of return he would realize if he sold the treasury and the rate he would receive if he bought a C. D. Am I correct?

 

[pb4uski]

No, you are incorrect. What happened in the past is past and is common to both alternatives, what is relevant is only what will happen in the future.

If you go to the sell screen it will tell you the YTM that equates the proceeds if you sold today to the remaining interest coupons and maturity proceeds.

Then when you buy a different fixed income security, it will tell you the YTM from today to maturity based on your purchase costs and the remaining interest coupons and maturity proceeds.

All else being equal, for example similiar credit quality and maturity, the higher YTM is the optimal holding.

So last week, I was selling GSE bonds that had a YTM based on their selling prices of ~4.7% and buying brokered CDs with similar maturities so as to not mess up my ladder with YTMs of 5%+.

So this would be correct:

When determining if one can benefit from selling a treasury and buying a C.D. it occurs to me one would need to know [-]the price he paid for the treasury[/-], the price he would receive if he sold the treasury, [-]the length of time he held the treasury, the rate of return he would realize if he sold the treasury[/-] and the rate he would receive if he bought a C. D. Am I correct?

 

[lawman]

No, you are incorrect. What happened in the past is past and is common to both alternatives, what is relevant is only what will happen in the future.

If you go to the sell screen it will tell you the YTM that equates the proceeds if you sold today to the remaining interest coupons and maturity proceeds.

Then when you buy a different fixed income security, it will tell you the YTM from today to maturity based on your purchase costs and the remaining interest coupons and maturity proceeds.

All else being equal, for example similiar credit quality and maturity, the higher YTM is the optimal holding.

So last week, I was selling GSE bonds that had a YTM based on their selling prices of ~4.7% and buying brokered CDs with similar maturities so as to not mess up my ladder with YTMs of 5%+.

So this would be correct:

Once again it sounds like I am trying to make something difficult that is simple. So when I place the order to sell the treasury it will tell me my rate of return as of that date on that treasury assuming I sold at a certain price??

 

[COcheesehead]

Once again it sounds like I am trying to make something difficult that is simple. So when I place the order to sell the treasury it will tell me my rate of return as of that date on that treasury assuming I sold at a certain price??

It will tell you your selling yield. You’ll have to calculate your rate of return.

 

[lawman]

It will tell you your selling yield. You’ll have to calculate your rate of return.

So I would need to make that calculation before knowing whether I should sell or not. Correct?

 

[copyright1997reloaded]

So I would need to make that calculation before knowing whether I should sell or not. Correct?

In theory, yes. In practice, don't over think it:

For example: If you bought a Treasury that had a 4.9% or 5% YTM and your sell screen shows it now has a 4.5% YTM, that means your YTM for the period that you held it was GREATER than the original 4.9% or 5%. (WHICH IS GOOD FOR YOU.) So you could sell it and reinvest the proceeds in a CD that yields more.

To get in the weeds:

If you want to calculate the real values, you can use the YIELDDISC excel or google finance spreadsheet formula to calculate your return on the treasury. You can use the YIELDMAT formula to calculate the remaining YTM on the treasury if you continue to hold it. Both of these would use the pricing data (i.e. what the treasury is currently selling for.)