Willers
Full time employment: Posting here.
- Joined
- May 13, 2013
- Messages
- 733
I understand that there isn’t value (at least for me and probably most on here), but someone is buying them so I’m wondering if anyone knows who is. Simple curiosity.
We are entering a "Golden Period" for fixed income investing
- Thread starter Freedom56
- Start date
- Status
I understand that there isn’t value (at least for me and probably most on here), but someone is buying them so I’m wondering if anyone knows who is. Simple curiosity.
I didnt see that one previously... I was looking at these two for options of a 5 year.. in case you are looking at options.
BMO 06374VBX3 6.25%
C 17330YMB3 6.25%
Freedom56
Thinks s/he gets paid by the post
The short answer is bond funds. Only bond funds would be dumb enough to buy Microsoft 2.525% 30 year bonds all the way up to $110 dollars and now sell those bonds at $60.
https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C907485&symbol=MSFT4996721
This site will tell you which funds were dumb enough to buy this bond from Microsoft.
https://fintel.io/so/us/594918cc6
Last edited:
Freedom56
Thinks s/he gets paid by the post
This one is actually a good trade-off if rates happen to keep rising as you would benefit from higher coupons later on. However there is a high risk of this note being called.
Did Freedom say they have issued ~7% on these financial ones? I want them too.. the last one i saw that was close was 6.75% for a 5 year maturity on GS. I think he has said he expects them to hit a higher yield when some sell off occurs (which hasnt happened yet). I also think there are a lot more people buying which will drive the price down.. unfortunately. I have been buying 7% yields but its small amounts on fairly risky companies.
Okay. Thanks. Maybe I'll just treat it as more like a 4-year bond for purposes of building a bond ladder.
There's another Wells Fargo multi-step bond that really is a 4-year bond.
Cusip 95001DCL2
But this one also seems to have a good chance of being called before the last year.
Wells Fargo is relatively safe, right?
Freedom56
Thinks s/he gets paid by the post
We are coming into tax loss selling season. The retail notes over 6% coupons are finding buyers. Those are relatively small issues and retail investors hold those notes for the most part until maturity. You have to target the larger institutional issues that have over $500M outstanding from the banks to get the deals. You also have to buy on days when there is massive selling in the market. Watch the inflation number this week for clues on where we are headed with rates even though it's one data point. Bank stocks have been moving up over the past few weeks. They usually start moving up a few months before the last rate hike.
Freedom56
Thinks s/he gets paid by the post
Yes Wells Fargo is safe. The big banks will in the US are safe. The big banks in Canada are even safer.
Willers
Full time employment: Posting here.
- Joined
- May 13, 2013
- Messages
- 733
Thanks. Great info on the Fintel site. Thanks for the link.
Thanks for the links. Those are some very informative and interesting sites.
Trailwalker
Full time employment: Posting here.
- Joined
- Mar 19, 2021
- Messages
- 626
That's depressing. Wellington is a recent and frequent buyer of the Microsoft bonds.
lawman
Thinks s/he gets paid by the post
Just bought Citibank CUSIP 17330YQT0. 1 year paying 5.5% recent issue
settles 11/16/22
settles 11/16/22
Freedom56
Thinks s/he gets paid by the post
Nothing wrong with that. It's a safe bet with better yields than a CD or treasury.
My limit orders are not filling. I need distressed fund selling to get my orders filled. That won't happen until the market takes its next leg down or investors start booking their losses.
I am so confused about the Canadian Banks. I saw two different bonds on Vanguard from the Bank of Nova Scotia. One is a new issue. The other is on the secondary market. The YTM is a little bit better on the new issue. (CUSIP 06417YBH1). However, the timing for my bond ladder and the chance of being called are better on the other one. (CUSIP 064159VL7).
The new issue was listed on Vanguard as being from "Bank of Nova Scotia," while the one on the second market was listed on Vanguard as being from "Bank of Nova Scotia BC." I was wondering if this difference was because the new issue was an American bond and the secondary market one was Canadian. I don't want to have to deal with Canadian taxes.
So, I called Vanguard, waited on hold for quite some time, and then talked to a guy at the bond desk who told me that there is no difference and both of them could be subject to Canadian taxes. This is both frustrating and confusing because I previously talked to someone at the Vanguard bond desk who told me that bonds issued in American dollars from banks that have bases in Canada are not subject to Canadian taxes.
I do not want the headache of possibly dealing with Canadian or other foreign tax returns. So, now I'm tempted to only buy American bonds. But, so many banks and corporations have international branches. How do I know which ones to buy?
Freedom56
Thinks s/he gets paid by the post
I am so confused about the Canadian Banks. I saw two different bonds on Vanguard from the Bank of Nova Scotia. One is a new issue. The other is on the secondary market. The YTM is a little bit better on the new issue. (CUSIP 06417YBH1). However, the timing for my bond ladder and the chance of being called are better on the other one. (CUSIP 064159VL7).
The new issue was listed on Vanguard as being from "Bank of Nova Scotia," while the one on the second market was listed on Vanguard as being from "Bank of Nova Scotia BC." I was wondering if this difference was because the new issue was an American bond and the secondary market one was Canadian. I don't want to have to deal with Canadian taxes.
So, I called Vanguard, waited on hold for quite some time, and then talked to a guy at the bond desk who told me that there is no difference and both of them could be subject to Canadian taxes. This is both frustrating and confusing because I previously talked to someone at the Vanguard bond desk who told me that bonds issued in American dollars from banks that have bases in Canada are not subject to Canadian taxes.
I do not want the headache of possibly dealing with Canadian or other foreign tax returns. So, now I'm tempted to only buy American bonds. But, so many banks and corporations have international branches. How do I know which ones to buy?
Canadian banks that issued bonds in US dollars though agents in the US are not subject to Canadian taxes. Keep in mind some of the these Canadian banks large have operations in the US. For example, TD Bank is the 11th largest bank in this country. Bank of Montreal ranks 23rd. CIBC is 46th. Royal bank of Canada is 29th. I received my coupon payment from TD bank and there was no Canadian taxes withholding.
Fotodog
Recycles dryer sheets
Freedom, would you mind sharing an example of how you place a limit order? You are waiting for the price to come down to a point that you think is a good deal, correct? Once a limit order is placed, how long does it stay in place? I apologize if these questions have been answered already.
https://www.fidelity.com/learning-center/tools-demos/trading-tools/fixed-income-limit-orders-video
you want 2:50 seconds for your specific question.
Schwab, you need to call in for FI limit orders. so basically the answer is it depends on who you use as a broker but the expirations for fidelity and Schwab appear to be the same based on this info.
I know you wanted Freedom to chime in but the video is pretty good too.
Freedom56
Thinks s/he gets paid by the post
Putting a limit order on bonds is not that different from stocks except there are important differences:
1- Bonds mature at par or are called at par in most cases. Bonds rarely trade at negative yields.
2- Stocks have no par value or nor any defined .
3- Bonds trade over the counter. There is no central exchange like stocks.
4- Liquidity is low. Most bonds rarely trade as investors hold them to maturity and collect the coupon payments and their principal back at maturity.
Fund and institution buying/selling adds liquidity. Those are driven by fund inflows and outflows. Always buy corporate bonds below par. You can get burned by early calls due to change of control or many number of issues unrelated to the bond your are buying. Early calls don't always pay a premium and if they do, it may not be enough to cover the premium over par that your are paying. The YTW calculations are often inaccurate and do not cover all cases. You should therefore not buy based on YTM alone which is based on price paid and coupon. As a rule, I will only buy bonds at or below par. Also select corporate bond that have coupons at least coupons close to current treasury yields of the same duration but the higher the spread over treasury yields, the better. I buy for cash flow so I can re-invest coupon payments. There are a lot of sub 2% bonds out there that were issued in 2021 that I would avoid unless you can get a 2 point premium in YTM compared to higher coupon bonds from the same company for the same approximate maturity. To place limit orders, wait for the bond you are interested in starts trading below par and at a yield you are comfortable locking in at. When a bond is available for sale, an order book will form. With Fidelity you can enter limit orders between the lowest bid and lowest ask or about 2 points below the lowest bid in some cases. Unlike stocks where there may be hundreds of thousands of individual trades a bond may have on average 12 -20 trades on an active day. So you have to be patient with limit orders.
Fotodog
Recycles dryer sheets
Lordjust, thanks for posting that video. I’m with Schwab, so I’ll need to call if I want to place limit orders.
Freedom, thanks for the detailed response. Lots of good information.
Freedom, thanks for the detailed response. Lots of good information.
I am as well. Good luck with them as my experiences so far have been horrific.
Freedom56
Thinks s/he gets paid by the post
I have Schwab, TDA, and Fidelity. Schwab is reserved for mostly new issues along with TDA. TDA used to have the ability to set limit orders online on bonds but that feature went away when Schwab bought TDA. Brokerage firms make a lot of money from fixed income trading from the bid and ask spreads. When they quote you a YTM that is 0.5-1% lower that the trace data, they are padding their markup. Fidelity still allows you to place limit orders online so I buy most of my secondary bonds from Fidelity. They have much less access to newer issues. New issue bonds and CDs have a 1.8% to 2% commission built into the price and yield. The fixed income traders at Schwab and Fidelity are sales people that push buttons. At TDA some actually know something about bonds. It's not clear if those people will be pushed out as Schwab integrates TDA.
Schwab and Fidelity are pushing fee based manage accounts but as you have seen, that could lead to you money being managed by a recent graduate in film studies "making sausage". One retired couple we know has a wealth manager with those credentials. But looking at the big picture, today you can easily construct a portfolio yourself with high grade bonds with an average duration of 4.5 years with an average coupon of 5.5-6.25%. The typical bond fund with that duration still only yields 2.1% with zero capital protection. They cannot compete with a bond ladder based on some common sense. Yes it's a bit more work but in the long run it's well worth it.
Schwab and Fidelity are pushing fee based manage accounts but as you have seen, that could lead to you money being managed by a recent graduate in film studies "making sausage". One retired couple we know has a wealth manager with those credentials. But looking at the big picture, today you can easily construct a portfolio yourself with high grade bonds with an average duration of 4.5 years with an average coupon of 5.5-6.25%. The typical bond fund with that duration still only yields 2.1% with zero capital protection. They cannot compete with a bond ladder based on some common sense. Yes it's a bit more work but in the long run it's well worth it.
I am seeing (lately) more new issued bonds on fidelity ... and I have had Schwab twice "refuse" to put in orders for me that would go to the secondary market. I have also had two orders placed that were never filled for new bonds.
17330YJ68 (today available on their site)
06374VBZ8
I called my rep to complain and he acted stunned and said he would get back to me... never heard a peep back. Just wanted to set expectations for people on this forum based on my experience.
lawman
Thinks s/he gets paid by the post
I don't think 17330YJ68 has settled yet. Are you saying you were not even able to place that order? It is still up on Schwab.
Last edited:
- Status
Similar threads
