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

[lawman]

Yields are pulling back due to the latest inflation numbers. It's only one data point but more likely rates are beginning to peak. I locked in some 5 year CDs at 5% from Capital one (adding to some ultra-conservative investments) and placed many orders for more new issue high grade corporates from GS and Citigroup (anything over 6% coupons). 5 year callable high grade notes are now yielding 5.4%. The new issues were from US and Canadian banks were selling out fast and now are all gone. I still have a lot of dry powder for tax loss selling season.

Thanks Freedom..Looks like all the Citigroup new notes at Schwab are gone. I hope my orders fill.. I too will likely begin to assume rates are at or near peak...Thanks again..

 

[Fermion]

I picked up some 2 year T bills at a 4.8% yield on Tuesday, I also think we may be near a peak on the short term stuff.

 

[Dash man]

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

Someone help me out here..
On 5/16/22 I bought a $50,000. T-Bill (CUSIP 912828-TY-6) with a YTM of 1.443%. I paid a total of $50,047.13.
It matures 11/15/22. How much money should I receive at maturity?

That’s not a T-Bill, it was originally a 10-yr T-Note. So you will get the $50,000 face value plus the final interest payment of $412.50.

 

[Montecfo]

It is a good CPI report.

Monthly increases last 4 months:

July 0.0
Aug 0.1
Sept 0.4
Oct 0.4

That is CPI growth at a 2.7 % annual rate over the past four months.

This is why I have been extending maturities. Hope we get another crack at good rates.

 

[JoeWras]

What did happen to the GM bondholders?

They took a hit. Some settled and got rights to buy the new stock. The math is confusing, so I won't even give you numbers because when you search, they are all over the place. Let's just say it was definitely less than 50% of par, and more than 1%. And keep in mind it is complex because they didn't get money, they got swapped to the right to convert to equity. And some people "forgot" to convert and you'll see class actions all over the place.

I have no idea what happened to those who didn't settle.

 

[lawman]

That’s not a T-Bill, it was originally a 10-yr T-Note. So you will get the $50,000 face value plus the final interest payment of $412.50.

Thanks!

 

[Montecfo]

What did happen to the GM bondholders?

The critical part is bondholders' rights were not respected. The unions were bailed out and placed ahead of bondholders.

 

[Spock]

I'll take the Washington monument if it comes to that.

But the treasure map is on the back of the Declaration of Independence....

 

[JoeWras]

The critical part is bondholders' rights were not respected. The unions were bailed out and placed ahead of bondholders.

And the government was involved.

 

[Spock]

The critical part is bondholders' rights were not respected. The unions were bailed out and placed ahead of bondholders.

That deal pretty much soured me on all corporate bonds.

But if you want to be paranoid, google bank bail-INs.
This is one of the less wild-eyed descriptions:
https://www.investopedia.com/articl...716/why-bank-bailins-will-be-new-bailouts.asp
Do you really think a desperate bureaucrat is going to be stopped by "funds above the FDIC limit only" I don't remember if it was Hank Paulsen (secretary of the treasury) or Geithner (President of the Federal Reserve Bank of New York) but one of them reportedly had to rush out of a conference room and vomit (twice!) while begging the speaker of the house to approve the bailouts.

 

[NomDeER]

Yields are pulling back due to the latest inflation numbers. It's only one data point but more likely rates are beginning to peak. I locked in some 5 year CDs at 5% from Capital one (adding to some ultra-conservative investments) and placed many orders for more new issue high grade corporates from GS and Citigroup (anything over 6% coupons). 5 year callable high grade notes are now yielding 5.4%. The new issues were from US and Canadian banks were selling out fast and now are all gone. I still have a lot of dry powder for tax loss selling season.

I was busy earlier this morning and just looked at the news and looked at Vanguard's offerings. All those bonds and CDs you bought are gone. I am trying to just buy a one-year CD and the site appears to have crashed.

This is what I was worried about when I posted last week asking why people were waiting to buy longer bonds. I still have a lot of cash.

 

[Winemaker]

What did happen to the GM bondholders?

I lost almost 100% of my $17,000 investment. I was given worthless stock of 2 classes and warrants. Sold them for less than $100.

 

[Freedom56]

I was busy earlier this morning and just looked at the news and looked at Vanguard's offerings. All those bonds and CDs you bought are gone. I am trying to just buy a one-year CD and the site appears to have crashed.

This is what I was worried about when I posted last week asking why people were waiting to buy longer bonds. I still have a lot of cash.

I still will not go beyond 5 year duration on corporates. It's much easier to manage a 5 year ladder. Right now my ladder is 8 years and as I stated last week, with time I will bring it into 5 years. A five year ladder fits in well with a FED tightening and loosening cycle and other market events that we have seen over the past decade. I expect the volatility to continue moving forward. The celebration today is all about the data driven Fed nearing the end of rate hikes based on one data point. Despite the euphoria in the markets, the reality is still a Fed funds rate that is 4% today and will likely move up to the 4.5%. Plus there is still a reality that bond funds still only pay .75%-2.4% yields despite the rise in rates all year. That won't change given that they hold too many low coupon bonds. Only dumb money would flow into a bond fund today so I still expect the exodus out of these funds to continue. The value is in the 1-3 year duration now.

 

[JoeWras]

I lost almost 100% of my $17,000 investment. I was given worthless stock of 2 classes and warrants. Sold them for less than $100.

I should amend my message to "Not less than 0.1%" instead of 1%.

Man that stinks, Winemaker!

 

[11522914]

I was busy earlier this morning and just looked at the news and looked at Vanguard's offerings. All those bonds and CDs you bought are gone. I am trying to just buy a one-year CD and the site appears to have crashed.



This is what I was worried about when I posted last week asking why people were waiting to buy longer bonds. I still have a lot of cash.

It's a tough game trying to time yields, particularly since we haven't seen these non-callable FDIC insured CDs at these rates in a loooooong time. So I've been slowly buying some 5 & 10 year CDs/bonds.

Up until today I only had 5.5% of my income assets in terms >5 years. The rest are < 3 months.

I bought 16% of my assets today on those 5 year non-callable CDs at 5%. So I still have 78.5% in 3 months or less.

It's hard locking in rates lower than the inflation rate.

Look at the inflation charts of the 70s. There were significant monthly increases in inflation, then significant drops, then back up again. Went on for years.

Who knows how this will play out.

 

[NomDeER]

I still will not go beyond 5 year duration on corporates. It's much easier to manage a 5 year ladder. Right now my ladder is 8 years and as I stated last week, with time I will bring it into 5 years. A five year ladder fits in well with a FED tightening and loosening cycle and other market events that we have seen over the past decade. I expect the volatility to continue moving forward. The celebration today is all about the data driven Fed nearing the end of rate hikes based on one data point. Despite the euphoria in the markets, the reality is still a Fed funds rate that is 4% today and will likely move up to the 4.5%. Plus there is still a reality that bond funds still only pay .75%-2.4% yields despite the rise in rates all year. That won't change given that they hold too many low coupon bonds. Only dumb money would flow into a bond fund today so I still expect the exodus out of these funds to continue. The value is in the 1-3 year duration now.

The five-year corporates are all gone except Ford and Dow Chemical. In fact, almost all the new issue corporates are gone. The five-year CDs are gone, too. It's one-years, etc. that are left.

 

[Freedom56]

The five-year corporates are all gone except Ford and Dow Chemical. In fact, almost all the new issue corporates are gone. The five-year CDs are gone, too. It's one-years, etc. that are left.

There are many more new issues in the pipeline. The Fed is already downplaying the inflation readings.

https://www.cnbc.com/2022/11/10/fed...-news-but-still-see-tighter-policy-ahead.html

 

[Montecfo]

I still will not go beyond 5 year duration on corporates. It's much easier to manage a 5 year ladder. Right now my ladder is 8 years and as I stated last week, with time I will bring it into 5 years. A five year ladder fits in well with a FED tightening and loosening cycle and other market events that we have seen over the past decade. I expect the volatility to continue moving forward. The celebration today is all about the data driven Fed nearing the end of rate hikes based on one data point. Despite the euphoria in the markets, the reality is still a Fed funds rate that is 4% today and will likely move up to the 4.5%. Plus there is still a reality that bond funds still only pay .75%-2.4% yields despite the rise in rates all year. That won't change given that they hold too many low coupon bonds. Only dumb money would flow into a bond fund today so I still expect the exodus out of these funds to continue. The value is in the 1-3 year duration now.

Well, we actually have several data points: the monthly CPI readings for July-Oct.

The Fed is not done yet but the market believes it can see the end of hikes, and possibly sense the start of cuts in the future, and will continue to reflect that new reality in yields. That is, until we begin seeing contrary data.

 

[lawman]

This is making my head explode. I have a lot of money I need to invest.
It looks like rates will continue to rise until they peak and then maybe at some point begin to go down again until the Fed feels the need to level off or make adjustments one way or another unless things change..
All I need to know is when to invest, what to buy and for how long in order to maximize my profit..

 

[aja8888]

This is making my head explode. I have a lot of money I need to invest.
It looks like rates will continue to rise until they peak and then maybe at some point begin to go down again until the Fed feels the need to level off or make adjustments one way or another unless things change..
All I need to know is when to invest, what to buy and for how long in order to maximize my profit..

Take a deep breath and relax. You will have opportunities coming up. Inflation is not dead and these market run ups are just bear market rallies.

No one knows exactly "when" to invest. Do the best you can with the information in front of you. And like Cramer says, "there's always a bull market somewhere".

 

[jldavid47]

It's a tough game trying to time yields, particularly since we haven't seen these non-callable FDIC insured CDs at these rates in a loooooong time.

[snip]

Look at the inflation charts of the 70s. There were significant monthly increases in inflation, then significant drops, then back up again. Went on for years.

Who knows how this will play out.

Exactly. Which is why I am sticking to the plan I made a couple of months ago. Today is probably an aberration (and short covering) and the trend will likely resume soon. Or not. We could easily see things turn back around tomorrow if Powell comes out and says "Don't get too excited, Sparky. That report changed nothing with respect to what we are doing." Powell keeps invoking the experience of the 70s. The market ain't listening (or doesn't want to believe it).

I have an allocation, I have a ladder and I have a plan. Nothing that happened today changes that. Changing my intermediate-term plan due to a single piece of data would be stupid. Changing course might work out better, but it wouldn't make it any less stupid.

 

[MercyMe]

Cash at Fidelity now earns 3.59% with FZDXX. This is more than double ultra short duration bond funds and there is no loss of capital with this money market fund.

Hey Freedom, where on Fidelity's website are you getting that chart? I've searched high and low for it.

 

[Freedom56]

Hey Freedom, where on Fidelity's website are you getting that chart? I've searched high and low for it.

I own FZDXX and this is where my cash is held. Under positions just click the row with your position in FZDXX. You can do the same for any cash sweep you use. Just click row containing that postion.

 

[Freedom56]

This is making my head explode. I have a lot of money I need to invest.
It looks like rates will continue to rise until they peak and then maybe at some point begin to go down again until the Fed feels the need to level off or make adjustments one way or another unless things change..
All I need to know is when to invest, what to buy and for how long in order to maximize my profit..

Just keep adding to the ladder as good deals come up. It's not like rates are headed back to zero.

 

[Fermion]

I'm quite happy with my 2 year treasury bills 4.25% coupon bought at 99.05....especially happy if inflation really is dropping now.

Still going to buy 20k more ibonds in Jan though....