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

[Freedom56]

My 5 year TD bank note (6.25%) order was just filled at TD Ameritrade (TDA).

Still waiting to see if the 5 year callable Goldman Sachs note (6.75% ) gets filled.

The highest new issue corp note I see today at TDA is 6.1%, 5 yr callable, Citigroup global markets. Settlement date is 11/17/22 (3 weeks away). I guess Citi wants to see what the Fed does/says during next week's Nov rate hike meeting before finalizing this offer.

I placed an order early-on for the 5 year, 6.75% Goldman Sachs new issue and the order status was quickly shown as "pending", and the "Cancel" button is not selectable. They tied up my cash...

I am not going to place an order for the Citi until there is some certainty from the Fed meeting.

Lesson learned.

My GS 6.75% orders on both accounts at Fidelity now show "Execution Pending". Yields are falling back ahead of the Fed decision next week. I just wonder if he will say something to spook the markets again or spark another bear market rally.

 

[Rianne]

There are already bonds yielding above 6% for 10. There was a recent new issue yielding 7% for 10 years.

Do you mean the coupon is 6% for 10 years? I want to be in treasuries or agencies. You must mean corporate bonds. I have a terrible memory of DH/me sitting in a Merryl Lynch office feeling excited about Enron selling bonds at 8.5% (around that). We had a broker who must have felt empathy for our naivety. She guided us away from that purchase, which would have been a big one for us at the time.

 

[COcheesehead]

Do you mean the coupon is 6% for 10 years? I want to be in treasuries or agencies. You must mean corporate bonds. I have a terrible memory of DH/me sitting in a Merryl Lynch office feeling excited about Enron selling bonds at 8.5% (around that). We had a broker who must have felt empathy for our naivety. She guided us away from that purchase, which would have been a big one for us at the time.

Coupons at these levels. Agency bonds which are AAA rated or investment grade corporates.
There is a new issue 6.44% AAA rated agency available right now. 10 year if that appeals to you.

 

[Rianne]

Coupons at these levels. Agency bonds which are AAA rated or investment grade corporates.
There is a new issue 6.44% AAA rated agency available right now. 10 year if that appeals to you.

NS! If this lasts through Jan. 23, when our ship comes in, we are truly golden. I just got a chill up my spine.

 

[Freedom56]

I'm interested in cash flow (and preserving the principle and the interest paid at the end) as I stated a while back and Freedom explained the coupon going to the settlement account. Will a coupon reach 5% for a 10-year note? Ha! If that happens, we are truly golden.

The last time I bought a 10 year treasury was around 2007 at around 4.62%. With corporates like TD bank and Bank of America offering 6.25% and 6.35% 5 year notes, there is no point in buying treasuries now.

 

[Letj]

You need to embrace the "golden period", there is no pressure to be fully invested. You can sit back and wait for right opportunities. I just hope I get my allotment of GS 6.75% notes.

Me too. I am still waiting on mine through Fidelity. They told me they need to make sure they’re fair to all their customers and I may not know until the end of this month.

 

[Freedom56]

Me too. I am still waiting on mine through Fidelity. They told me they need to make sure they’re fair to all their customers and I may not know until the end of this month.

It should say "execution pending" today if they are filling your order. The orders closed this morning.

 

[baseman250]

It should say "execution pending" today if they are filling your order. The orders closed this morning.

“Execution pending” here also.

 

[COcheesehead]

Me too. I am still waiting on mine through Fidelity. They told me they need to make sure they’re fair to all their customers and I may not know until the end of this month.

Mine says pending execution as of today.

 

[Sunset]

Freedom, I am not quite taking it the way the market is front loading info. Here is exactly what Bank of Canada said in paragraph below….The market creates its own agenda. BoC never said 75 or 50 to begin with. But that being said, I certainly believe the heavy lifting is behind though.

“Given elevated inflation and inflation expectations, as well as ongoing demand pressures in the economy, the Governing Council expects that the policy interest rate will need to rise further. Future rate increases will be influenced by our assessments of how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding. Quantitative tightening is complementing increases in the policy rate. We are resolute in our commitment to restore price stability for Canadians and will continue to take action as required to achieve the 2% inflation target”.

IMHO, Bank of Canada is "hoping" inflation comes down, since a large portion of inflation is based on rental cost. The Ont govt have manipulated the market by imposing for Ontario a 2.5% rent increase cap even while inflation is ~7%. By putting the expense/cost on the landlords, this will pull down their inflation rate by ~1->1.5% (rough est) plus whatever rate change other parts of the economy have which may be + or -.

 

[bmcgonig]

Got the BOA and TDA at Schwab.
Goldman just says OPEN. Nothing else.

 

[copyright1997reloaded]

Since we've laddered $200k+ and want to sell those notes to combine and make the big buy next year, how will that fan out? Will we lose $ selling notes purchased at lower interest rates?

For example, a $1000, 3.5% treasury note was bought at $97 for 3 year time period on March 31, 2021. How do the coupon rate and interest work when selling? Does it just depend on the moment of selling? If interest rates continue to rise, should that note be sold sooner than later?

A 3 year note w 3.5% coupon bought 3/31/21 should sell around $98.24 on 3/31/22 (2 years to go) if interest rates stay where they are on a 2 year (4.39% as of yesterday). That is, a 2 year 3.5% coupon note if sold w/a YTM of 4.39% would cost approximately $98.24 per $100.

If interest rates for a 2-year are 5% on 3/31/21, the 3.5% note (with 2 years left) should price around $97.21 per $100 to have a 5% YTM.

If interest rates for a 2-year are 6% on 3/31/21, well then you are under water, as they should price around $95.41.

 

[Freedom56]

I don't know if the "Bank Gods" (See below) are going to bless us all with with more 6%+ short term high grade notes. Lord Powell has to step in as yields have pulled back once again from the target Fed funds rates.

https://www.reuters.com/article/us-...says-banks-do-gods-work-idUSTRE5A719520091108

 

[Born2Fish]

It should say "execution pending" today if they are filling your order. The orders closed this morning.

My 6.75 order at TDA shows "Filled".

 

[jazz4cash]

Not to derail, but paying 20B in bonuses on 3B in quarterly revenue doesn’t sound right. Maybe I should not have loaned them money, even at 6.75%.

 

[lordjust]

Got the BOA and TDA at Schwab.
Goldman just says OPEN. Nothing else.

I received it about 30 min ago at Schwab for GS

 

[Freedom56]

Not to derail, but paying 20B in bonuses on 3B in quarterly revenue doesn’t sound right. Maybe I should not have loaned them money, even at 6.75%.

First of all that article was from 2009 when the CEO made the comment. I posted this in jest as the CEO claimed bank are doing God's work. Bonusses are primarily in the form of stock compensation so equity holders are the one's facing dilution from company bonuses. Since the 2009 financial crisis banks are restricted from how much stock they can buy back and are subject to financial stress testing which is good for the overall system. Your 6.75% loan is likely funding loans to consumers and businesses at much higher rates.

 

[Freedom56]

Both my orders for GS 6.75% filled at Fidelity. 2027 notes from GS are currently trading at a yield of 5.5% on the secondary market. So this note will be valued above par as long rates stay around this level.

They way I see it, we get 6.75 % with very little risk, for at least one year. So we can sip champagne and eat caviar for the next twelve months.

There is a 2025 non-callable bond that could break below par from Wachovia that is now Wells Fargo. It was issued in 1995 with a coupon of 6.605%.
The duration is now just under 3 years. Keep an eye on this one for tax loss selling season.

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C31070&symbol=WFC.MS

 

[jldavid47]

Lord Powell has to step in as yields have pulled back once again from the target Fed funds rates.

I'm not sure how you come to that conclusion or what you mean by step in. The current fed Funds target range is 3.00-3.25%. A 0.75% hike would put the range at 3.75-4.00% Here are short-term Treasury yields (according to the Treasury Department) as of today:

1 month: 3.76%
2 months: 3.95%
3 months: 4.13%

Right in the expected range for the next hike (3 month is slightly above) and no different than what they have been saying for weeks. Do you mean they need to do more than what they have been signaling?

 

[lordjust]

I'm not sure how you come to that conclusion or what you mean by step in. The current fed Funds target range is 3.00-3.25%. A 0.75% hike would put the range at 3.75-4.00% Here are short-term Treasury yields (according to the Treasury Department) as of today:

1 month: 3.76%
2 months: 3.95%
3 months: 4.13%

Right in the expected range for the next hike (3 month is slightly above) and no different than what they have been saying for weeks. Do you mean they need to do more than what they have been signaling?

I do not know how Freedom will respond but i will say that yields on ALL of the corporate bonds I have been watching have pulled back. I have been kicking myself for not buying just 5 days back. My theory is they saw what happened in Canada and believe the US will will not follow through with the promised hikes (number). Probably due to the slowing housing market. I honestly doubt they have a choice...

 

[Freedom56]

I'm not sure how you come to that conclusion or what you mean by step in. The current fed Funds target range is 3.00-3.25%. A 0.75% hike would put the range at 3.75-4.00% Here are short-term Treasury yields (according to the Treasury Department) as of today:

1 month: 3.76%
2 months: 3.95%
3 months: 4.13%

Right in the expected range for the next hike (3 month is slightly above) and no different than what they have been saying for weeks. Do you mean they need to do more than what they have been signaling?

The two year note is a forward indicator of where the market believes the Fed funds rate will be in 12-18 months. It has been pulling back this past week. It is at 4.27% versus just over 4.5% a few days ago. The Fed has been signaling a terminal rate of around 4.5% to 4.8% and then remain in a holding pattern for an extended period of time waiting for inflation to fall.
Somehow the market is still speculating that we may not get up that high.

https://www.bloomberg.com/markets/rates-bonds/government-bonds/us

 

[Freedom56]

I do not know how Freedom will respond but i will say that yields on ALL of the corporate bonds I have been watching have pulled back. I have been kicking myself for not buying just 5 days back. My theory is they saw what happened in Canada and believe the US will will not follow through with the promised hikes (number). Probably due to the slowing housing market. I honestly doubt they have a choice...

Next week if the market perceives Lord Powell to be dovish, it could trigger a bear market rally. If he spooks the market, he will basically ring the opening bell for tax loss selling season. The action is likely to be in the secondary markets moving forward.

 

[jazz4cash]

First of all that article was from 2009 when the CEO made the comment..

Ok that makes me feel better. I was joking also but the revenue and bonus numbers don’t look right. My order for the 6.75 GS note filled and closed a bit above par.

 

[lordjust]

i dont know how "valuable" this site is for most people but i thought i would share it.. i stumbled across it and found it helpful when trying looking for bonds that didnt appear in new issues.

https://www.us-mtns.com/fixedRateDeals

 

[Freedom56]

i dont know how "valuable" this site is for most people but i thought i would share it.. i stumbled across it and found it helpful when trying looking for bonds that didnt appear in new issues.

https://www.us-mtns.com/fixedRateDeals

The best one is the Bank of Montreal 6.25% 5 year note. It's a higher grade note than GS and a much safer bank. It will all depend on how the market reacts to the Fed next week.