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

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imbatman said:
This is a great reference, I only learned about these on this site as well. In addition to a step up in safety from corporate bonds, agency bonds are great for tax savings on high local / state taxes.

https://www.raymondjames.com/wealth...vernment-sponsored-enterprise-debt-securities
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I called the bond desk & learned some things. He didn’t know why the bond was trading on the secondary market at a discount even though it is a new issue. There was no settlement date like you’d have with a new issue. Apparently secondary market bonds settle the next day. At least that’s what I got out of it. 6%+ for 3 months beats the money market fund @ 5%. If the fed raises rates that gap will close but it’s looking like the Wall st people are running stocks up on the idea the fed is done raising rates for now. We’re going to find out if they’re right
 
I think this was discussed back when I used to lurk here, but I can’t remember now. Why do Federal Farm bonds yield more than other GSEs? Is there more actual or perceived risk?
 
Free bird said:
I called the bond desk & learned some things. He didn’t know why the bond was trading on the secondary market at a discount even though it is a new issue. There was no settlement date like you’d have with a new issue. Apparently secondary market bonds settle the next day. At least that’s what I got out of it. 6%+ for 3 months beats the money market fund @ 5%. If the fed raises rates that gap will close but it’s looking like the Wall st people are running stocks up on the idea the fed is done raising rates for now. We’re going to find out if they’re right
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Yeah I just had another order filled today at $100 via Fido, even though I was easily getting them for $99.75 at ML. I even called Fido Fixed Income Desk and they were very confused saying they could see prices below $100 on their end but there was no way for a normal user to see or buy at those lower prices online (with Fido) since it was a new issue (and goes in at their set "expected" price and is filled separately). They didn't even have a secondary market viewable for these since not issued until tomorrow. Not a big deal but $10, $20, $50 each time over the course of a year as these get called can add up.
 
imbatman said:
Yeah I just had another order filled today at $100 via Fido, even though I was easily getting them for $99.75 at ML. I even called Fido Fixed Income Desk and they were very confused saying they could see prices below $100 on their end but there was no way for a normal user to see or buy at those lower prices online (with Fido) since it was a new issue (and goes in at their set "expected" price and is filled separately). They didn't even have a secondary market viewable for these since not issued until tomorrow. Not a big deal but $10, $20, $50 each time over the course of a year as these get called can add up.
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My 50k filled at 100 today. No reason, no rhyme. In the end it doesn’t really matter much.
 
Enabled margin on my TDA Roth account. Queued up a sale of swvxx to fund the sweep account (normally kept at zero). Funds available for trading showed what I needed. Executed a CD purchase (5.3% 1yr ladder) against "funds available for trading". Account went into margin call. Called the rep and was told to ignore margin call. Two days later all is good.
If I didn't like TOS better than Fids platform (I have many scripts for the TOS platform) I would move everything to Fid.

Sent from my moto g power using Early Retirement Forum mobile app
 
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Fido - added a new FFCB 15-year 06/16/2038 5.69% that isn't callable until 2025, so while the rate is a little sketchy for that long, a 2-year lock is nice (3133EPMG7)
 
Freedom56 said:
If you hold a corporate bond for over a year, a gain from a discount is taxed at your capital gains rate. If it is less than a year, it is treated as ordinary income.
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The entire Bogleheads site and two tax accountants have told me that it is ordinary income, except for what the IRS calls nominal interest rate discount related gains. Now of course gains over par are capital gains. This is obviously a very important point so I am confused that I keep getting different answers. I also personally read every page of the IRS publication on the topic and came to the conclusion it’s ordinary income as well.
 
Echard said:
The entire Bogleheads site and two tax accountants have told me that it is ordinary income, except for what the IRS calls nominal interest rate discount related gains. Now of course gains over par are capital gains. This is obviously a very important point so I am confused that I keep getting different answers. I also personally read every page of the IRS publication on the topic and came to the conclusion it’s ordinary income as well.
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I think they are confusing municipal bonds being purchased at a deep discount to par where a threshold applies.

https://www.businessinsider.com/personal-finance/how-bonds-are-taxed

"If you buy a bond when it's first issued and hold it until maturity — the full length of its lifespan — you generally won't recognize a capital gain or loss. The money you get back is considered a return of your principal — what you originally invested in it.

However, after they're issued, bonds often trade on financial exchanges, just like stocks. If you sell them before their maturity date on the secondary market, the bonds can generate capital gains and losses, depending on how its current price compares to your original cost. Bond funds can also generate capital gains and losses as the fund manager buys and sells securities within the fund.

So, the profit you make from selling a bond is considered a capital gain. Capital gains are taxed at different rates depending on whether they're short-term or long-term.

Short-term capital gains apply if you hold the bond for one year (365 days) or less. Then the gain is taxed at your ordinary income tax rates.

Long-term capital gains apply if you hold the bond for more than one year. Then you can benefit from reduced tax rates, ranging from 0% to 20%, depending on your filing status and total taxable income for the year."
 
Freedom56 said:
I think they are confusing municipal bonds being purchased at a deep discount to par where a threshold applies.
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The discount doesn't have to be very deep (.25% per year to maturity) to end up being taxed at ordinary income rates (for municipal bonds only, though, not corporate).
I'm with Echard - it is all really confusing. Here is a reasonably thorough but still understandable explanation. However, I can find nothing on how a bond's de minimus calculation is done with a bond called before maturity.

https://www.msrb.org/sites/default/files/Original-Issue-Discount-Bonds.pdf
 
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"Long-term capital gains apply if you hold the bond for more than one year. Then you can benefit from reduced tax rates, ranging from 0% to 20%, depending on your filing status and total taxable income for the year."

Thanks for your advice Freedom.
Does this mean that we should try to always make longer than 1 year Bond purchases
(if happy with yield)?
 
Freedom56 said:
I think they are confusing municipal bonds being purchased at a deep discount to par where a threshold applies.
Click to expand...

nelsonowe said:
The discount doesn't have to be very deep (.25% per year to maturity) to end up being taxed at ordinary income rates (for municipal bonds only, though, not corporate).
I'm with Echard - it is all really confusing. Here is a reasonably thorough but still understandable explanation. However, I can find nothing on how a bond's de minimus calculation is done with a bond called before maturity.

https://www.msrb.org/sites/default/files/Original-Issue-Discount-Bonds.pdf
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With any bond sale, redemption, or call, I have always received a 1099-B indicating the gain (short or long term) in addition to the 1099-INT. You receive the same for brokered CDs.
 
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Healthy Lifestyle said:
"Long-term capital gains apply if you hold the bond for more than one year. Then you can benefit from reduced tax rates, ranging from 0% to 20%, depending on your filing status and total taxable income for the year."

Thanks for your advice Freedom.
Does this mean that we should try to always make longer than 1 year Bond purchases
(if happy with yield)?
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If you want to be taxed at long term capital gains for part of your bond YTM, then you should buy durations over one year.
 
So finally got ahold of my own accountant and he confirmed it’s capital gains. This is what I originally thought for a long time, and was the basis for me buying lower coupon bonds, so that a big chunk of gains would come from capital gains and not ordinary income. It’s just weird that I received so many wrong answers when I tried to confirm this over the last few weeks.
 
Echard said:
It’s just weird that I received so many wrong answers when I tried to confirm this over the last few weeks.
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You received all the wrong answers from a Boglehead forum. What does that tell you about that forum? Not only do they not understand bonds and basic arithmetic, but you can add basic income tax questions to the list.

We are over a year into rate hikes and while those who have invested in CDs, corporate notes, MM funds, and even savings accounts have realized higher yields, those pathetic Boglehead fools who are clinging onto hope that somehow earning 1.2-2.6% in distributions will compensate for the losses they endured in 2021 and 2022. As the treasury issuances flood the market in the coming months, it will become a lot nastier for holder of bond funds.
 
Had this one in the wrong thread… for the future when these two appear if anyone is interested.

just saw this one.. thought the JPM fans might be interested. Never checked into one of these step up ones before.. so i would be interested to hear the comments pos/neg about it.

https://www.sec.gov/Archives/edgar/data/19617/000121390023043239/ea155370_424b2.htm

On the 13th calendar day of June and December of each year, beginning on June 13, 2025 and ending on December 13, 2032

From (and including) To (but excluding) Interest Rate
June 13, 2023 June 13, 2028 5.50% per annum
June 13, 2028 June 13, 2031 6.00% per annum
June 13, 2031 June 13, 2032 7.50% per annum
June 13, 2032 June 13, 2033 9.00% per annum

(also coming soon)
https://www.sec.gov/Archives/edgar/data/1665650/000121390023043332/ea155368_424b2.htm
 
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My order for the following new issue was executed today.

Issuer: Goldman Sachs Group Inc
Coupon: 6%
CUSIP: 38150ATE5
Maturity: 06/12/2028
First Possible Call Date: 06/12/2024 at 100 on 5 days notice
 
Isn't it great that the 6% coupons are returning to high grade corporate bonds? This gives many of us hope that all those 6-6.75% notes will not be called this October/November. But since hope is not a plan, we can count on the Fed in combination with corporate greed keeping rates elevated through 2024. So if they do get called, there are so many fixed income alternatives (MM funds, CD, treasury's, high grade corporates) that it really doesn't matter.
 
From today’s WSJ:

Investors are bracing for a flood of more than $1 trillion of Treasury bills in the wake of the debt-ceiling fight, potentially sparking a new bout of volatility in financial markets.

Some on Wall Street fear that roughly $850 billion in bond issuance that was shelved until a debt-ceiling deal was passed—sales expected between now and the end of September, according to JPMorgan analysts—will overwhelm buyers, jolting markets and raising short-term borrowing costs.
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