We are entering a "Golden Period" for fixed income investing
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Freedom56
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I don't own MS but own BOA bonds. BOA is the second largest bank in America and a pretty solid bank. They went through their Wall Street media drama bank in 2011 after their buyout of Merrill Lynch after the 2008/9 financial crisis. All that is behind them.
Thanks! As always, you are very helpful. The GS that I was looking at is gone. Is there a reason you don't own GS? I'm trying to get a broader sense of what to buy so that I can pull the trigger when I see it. These bonds disappear so quickly.
What do you think of Wells Fargo? And what about the car finance companies like Ally? Is there anything in particular outside of banks and finance that you think are good? I'd like to diversify my corporate bonds.
Freedom56
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I own $400K of the GS 6.75% 2027 notes so I have no issues with them. Wells Fargo is okay. When you invest in large money center banks you have to tune out many of the sensational headlines. I own bonds from the following financials:
JP Morgan
Wells Fargo
Bank of America
Goldman Sachs
Citigroup
Bank of Montreal
TD Bank
Royal Bank of Canada
Bank of Nova Scotia
CIBC
Ally Bank (only the 5.75% non-callable 2025 notes)
I have owned Capital One notes in the past.
Morgan Stanley has never offered attractive yields compared to other US banks.
Just had TDA list my purchase of the GS note for 5 yr at 6% but the bond showed a close of 100.0836. It was listed at 100.00 when I requested a purchase two weeks ago. DW bought the same issue through VG at the same time and hers was purchased at 100.00. Why the difference and do I have any recourse with TDA?
Thanks. Sorry, I mistyped. I meant MS, not GS. Other than the lower yields, any issues with Morgan Stanley?
Is Ally Bank different from Ally Financial?
Freedom56
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There is nothing wrong with Morgan Stanley. Sorry it should be Ally Financial not Ally Bank.
Have the bond funds sold their holdings to raise money for investor end of year redemptions yet? I see very few with sub par prices and yields above 6%. Fidelity usually says " not in inventory" when I attempt to bid. Has the "Golden Period" not started yet?
MercyMe
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Good question. I'd love to know the answer to this. But from what I've seen (and I'm a total amateur), the Golden Period may have only existed for a couple of weeks back in early November. Like a bazillion other people, I've been looking everyday on TDA and Fidelity... so far... nothing good to be bought.
A few seasoned bond buyers here have been panning for gold and found it. But there isn't much to go around. I'm not far off from giving up on finding a place to invest 7 figures in bond dry powder that I've been holding on to for many months.
COcheesehead
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I have stayed true to my ladder strategy. As bonds matured, I reinvested the funds on the long end, rinse and repeat. I now have bonds/CDs purchased even just a few weeks ago that on days like today look absolutely stellar. The whole advantage of a ladder is it’s a mechanical, non emotional tool. Anyone waiting for “that moment” may be left standing on the dock.
JoeWras
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COcheesehead is my sibling from another mother. I've been preaching this for 6 months now. Totally agree.
I've stood on that dock before. Not only did the boat leave, the tsunami came and washed me away. No fun.
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I keep coming back to this thread to check for screaming deals when bond fund traders have to unload boatloads of bonds to pay for redemptions. To the extent this isn't blatantly happening, I wonder if the disadvantage of BND, and the like, isn't all that bad. But then again, maybe the institutional investors have an advantage, and us retail investors never get a sniff of the good stuff. So the fire sale is happening, there is a big disadvantage to bond funds, it's just that we're not allowed to participate in the feast, but only to pick up the crumbs?
This got me thinking (danger, Will Robinson!)...What if you defined a managed bond fund who's purpose in life was to snatch these goodies? It could be started-up as soon as the first noises start to get made about raising interest rates. It would NOT have the goal of being a certain percentage invested in bonds. Rather, it could sit in very short money until the deals pop-up, then snatch those, just like many of you guys are doing. Maybe there would be some kind of rule on redemptions, like if the fund is 50% in bonds, you can pull 50% of your investment out immediately, but after that, only as bonds mature. And once the rates started down, you'd just let everybody cash out as bonds matured, and the fund would close, or turn into a money market.
MercyMe
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That is great for you and COcheesehead. Well done! But this kind of sort of maybe a little tiny bit feels like a slap in the face to those of us that are trying to build our first ladder.
I've not been standing on the dock for long. I was buying $100k per order over many orders back in October/November... as I was racing through Annette Thau's Bond Book and making tons of notes from this thread and a couple of others.
There weren't enough high quality bonds that had above-6% yields... not enough for me to diversify six weeks ago. When they started to dwindle, posters here said to be patient as there would be more (and perhaps that is still true). Then Powell spooked the market and many decent bonds disappeared right away. Now that many, if not most are expecting a recession, the curve is much more inverted and non-callable bonds seem impossible to find at a reasonable yield.
Many of us are not guilty of timing (though I'm sure you weren't implying that). Many of us are just growing and learning in a market that is very, very new to us. We are not seasoned veterans who could have been laddering as you have. Many of us are new to laddering bonds because we thought (before this year) that bond funds were fine. Some of use got out of bond funds early enough since the writing on the wall was clear in December of last year. And because of this, some of us simply had large cash reserves that could have been put to good use had there been more opportunity.
lawman
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I placed an order for Goldman Sachs that showed up on my inventory a day or so ago..I received the notification in my email yesterday. I received the confirmation in my email today..It is not suppose to settle until tomorrow..Normally I would not even fund my cash account until the day before it settles..Why did this all complete before settlement date?
COcheesehead
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
A few voices (some admittedly who said they knew little about bonds) have been saying wait, but all one needed to do was watch yields. As short rates went up, intermediate and long went down. That was the golden moment, the market ringing a bell. I used the analogy earlier that timing the bond market was like a game of musical chairs. When the music stops you may not have a seat.That is great for you and COcheesehead. Well done! But this kind of sort of maybe a little tiny bit feels like a slap in the face to those of us that are trying to build our first ladder.
I've not been standing on the dock for long. I was buying $100k per order over many orders back in October/November... as I was racing through Annette Thau's Bond Book and making tons of notes from this thread and a couple of others.
There weren't enough high quality bonds that had above-6% yields... not enough for me to diversify six weeks ago. When they started to dwindle, posters here said to be patient as there would be more (and perhaps that is still true). Then Powell spooked the market and many decent bonds disappeared right away. Now that many, if not most are expecting a recession, the curve is much more inverted and non-callable bonds seem impossible to find at a reasonable yield.
Many of us are not guilty of timing (though I'm sure you weren't implying that). Many of us are just growing and learning in a market that is very, very new to us. We are not seasoned veterans who could have been laddering as you have. Many of us are new to laddering bonds because we thought (before this year) that bond funds were fine. Some of use got out of bond funds early enough since the writing on the wall was clear in December of last year. And because of this, some of us simply had large cash reserves that could have been put to good use had there been more opportunity.
Looking for yields only over 6% maybe in hindsight was the issue for your lack of action. I bought a bunch of bonds in the high fives. Non callable CDs at 5%. There were deals out there that were actionable as long as one was looking for pretty good and not perfect. We’d all like to be like Freedom56, but if I am 80% as good, that’s pretty good.
You still have a chance to invest today. I bought some non callable 4.8% CDs. That’s not great, but it’s pretty good.
The market will change. Nothing is static.
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That is great for you and COcheesehead. Well done! But this kind of sort of maybe a little tiny bit feels like a slap in the face to those of us that are trying to build our first ladder.
I've not been standing on the dock for long. I was buying $100k per order over many orders back in October/November... as I was racing through Annette Thau's Bond Book and making tons of notes from this thread and a couple of others.
There weren't enough high quality bonds that had above-6% yields... not enough for me to diversify six weeks ago. When they started to dwindle, posters here said to be patient as there would be more (and perhaps that is still true). Then Powell spooked the market and many decent bonds disappeared right away. Now that many, if not most are expecting a recession, the curve is much more inverted and non-callable bonds seem impossible to find at a reasonable yield.
Many of us are not guilty of timing (though I'm sure you weren't implying that). Many of us are just growing and learning in a market that is very, very new to us. We are not seasoned veterans who could have been laddering as you have. Many of us are new to laddering bonds because we thought (before this year) that bond funds were fine. Some of use got out of bond funds early enough since the writing on the wall was clear in December of last year. And because of this, some of us simply had large cash reserves that could have been put to good use had there been more opportunity.
Do you scan the available bonds daily on the secondary market ? I’ve seen a few decent deals. Lawman grabbed a couple that he was fairly public about on the thread. I have a saved search in Schwab that I run each day. The ones I have seen that pop up don’t last very long (2 days?). I also do searches on finra and believe me it takes a few hours to save the cusips I have seen that I monitor. I admit the offers have dropped fairly significantly but there have been a handful that were worth the longer term (my opinion). I just hope you’re not waiting for people to publish on the thread and then jump on them. I definitely time the purchases and like others wish I would have grabbed more of the 6-7% that were Canadian/us bank offerings. Not sure if you’re looking for income or cap gains (low coupons). If it’s any consolation I think ALL of my purchases have been callable. So… I’m sure they will get called in a year or two. I would also toss out that perhaps most of these funds are waiting to see what the fed is going to do before they make an end of year move.
skyking1
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I have enough cash to do I-bonds for the year. I'll have to move some around to fund a roth contribution for each of us too. The former is easy, the roth accounts are more aggressive and not so much fun to fund
I agree completely!
The available deals are still pretty dang good compared to a year ago.
JoeWras
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Oh gosh, I'm so sorry to cause grief.That is great for you and COcheesehead. Well done! But this kind of sort of maybe a little tiny bit feels like a slap in the face to those of us that are trying to build our first ladder.
I'm actually a treasury guy. So I see a lot of these corporate yields on this thread and feel insecure. Maybe I feel a bit of your pain?
As for laddering... I've been doing it forever. I admit, over the last 10 years my ladder has had a lot of missing rungs. Still, I feel it is a good discipline. Last winter, I started filling all those missing rungs and I'm glad I did.
I timed nothing. It is just a discipline I've had for 20+ years.
Thanks again. I tend to hesitate with buying bonds because I want to know what I'm buying and don't entirely feel comfortable with just relying on the bond rating. (Like Credit Suisse.) But, the bonds get snapped up so quickly! By the time I went to buy the non-callable Morgan Stanley yesterday, it was gone. It popped up again this morning. I tried to buy it, but got an error message. I looked to try again and it was gone. Then I tried to buy a TD Ameritrade bond and Vanguard said there wasn't enough left to fill my order and I ended up with only 2K. I did end up getting some Ally. It's the first time I've bought below A grade and I felt a little hesitant, so I only bought a little.
I think what is considered golden may depend on the person. I would like a AAA uncallable bond that doesn't mature for at least four years and has a yield at 7% or higher. But, that's not a golden bond. That's a unicorn.
Some people have a lot of money to invest in fixed income, are looking for good income for the next few years, know bonds well, can afford to take a little risk, and slowly have been laddering. IMO, this is definitely a golden period for them.For someone like me, I think this is a silver lining in some pretty stormy clouds. I did not sell for cash at the end of last year like some did. I kept my equity funds and bond funds. I held onto my bond funds too long and didn't sell until June. But, I've been slowly learning about and buying individual CDs and bonds and will earn back my bond fund losses within a year. I bought shorter term bonds first, which turned out to be a mistake. Logic told me that, with an inverted curve and market expectations that interest rates would go down, I shouldn't wait to buy the 4-5 year bonds, but I thought that people who said to wait might know more than they did. That might still turn out to be true. In any event, the decision - good or bad - is on me. And, whatever I buy will still be better than what I was getting from my bond funds and money markets a year ago. I have some short-term treasuries maturing over the next six months and I'll just invest in whatever seems to make the most sense then.
Even people who have been sitting on cash this year and waiting to buy bonds are getting much better returns in their money market accounts than they were at the beginning of the year.
That's a good analogy. I think the music hit a crescendo and slowed fairly abruptly, but it hasn't entirely stopped.
For a lot of the bonds, it's not even a couple of days. (And the best CDs last just a couple of hours sometimes.) A lot of bonds on the secondary market go very, very quickly. And, I imagine that there are people on the East Coast who beat me to deals. But, I'm not getting up super early every day to look for deals on the secondary market. That's too much like work to me. Also, some bonds that seem pretty good to me probably look like dogs to others. And vice versa. Some bonds aren't even candidates for me because of the minimum quantity.
It's not just people on this forum who suddenly are interested in individual bonds. It's true across the country. Plus, although people are selling a lot of bond funds, people are actually buying investment grade bond funds.
Freedom56
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Don't think for a moment that rates are suddenly going back to zero. It just won't happen. The days of ultra low interest rates created so many speculative garbage like crypto currencies, SPACs, and meme stocks are gone. Market bubbles take years to pop. To somehow believe that bond traders that are bidding up the 10 and 30 year treasuries are part of the smart money group would be a horrible mistake. Remember these are the same traders that bid up sovereign bonds to negative yields. They are also the same type of intellects that bloated bond funds with low coupon debt. All these traders are doing is extending the period that rates will stay elevated longer. I would listen to what the Fed has to say tomorrow with respect to the terminal rate and how long they will hold rates at the target Fed funds rate. We have been through two countertrend rallies of the 10 and 30 year treasuries this year. Both ended after Powell's press conference . The big picture is that yields are orders of magnitude better than last year. The buying opportunities will continue to appear as we move forward.
+1
Interest rate trends tend to persist for a long time - 20-40 years usually. That does not mean there are no corrections within those trends. This still looks like a correction to the larger upside trend in rates rather than a trend change to me. YMMV.
So here's a few questions... if your bond ladder's primary objective is predictability as opposed to creating income to live on, how should that affect the construction of your fixed allocation? Should 50%+ be in treasuries/CDs? Should you consider corporate bond ratings below ___ (A or BBB+)? From a diversified perspective, how many holdings should you have say per every $1M and what should be the min bond holding size (i.e. $100K)?
I know COcheasehead mentioned he's got 180 in his portfolio maturing at different times, yet I am still trying get my arms around the more optimal longer term construction once most of my short term holding mature. I realize there is more than one answer here, but what the "experts" have to say?
I know COcheasehead mentioned he's got 180 in his portfolio maturing at different times, yet I am still trying get my arms around the more optimal longer term construction once most of my short term holding mature. I realize there is more than one answer here, but what the "experts" have to say?
COcheesehead
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The 180 I have sounds like a lot, but consider that it’s a 10 year ladder, split between 3 accounts, taxable and muni involving several million. So when you break it down it’s actually pretty compartmentalized.
I buy what looks good at the time I have maturing funds balancing quality and yield and taking into consideration the type of account it’s going in - taxable vs tax deferred. Maturing funds go on the long end. My holdings range in value from $10k to $110,000k. Typical position is around $40,000k. Position size is driven mostly by how much cash I have at the time of the buy. I try and reinvest within a few days of maturing funds. If you are sitting on a pile of cash and just starting to construct a ladder, that’s a different story.
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My ladder is currently invested, but as I have previously mentioned, about 50% is maturing here in early 2023. Good or bad, that was the time I planned to start laddering out longer term (up to 10 years). If I recall, you are mostly invested in bonds as opposed to equities? In my case, I am still almost 70% in equities split around 55/45 (after tax/tax deferred accounts), although I did start Roth conversions this year. Getting tax strategic with my account types and incorporating munis is next on my agenda. As someone who will lean on their equities for long term growth and is using their bond ladder for predictability, I am just trying to underwrite the appropriate risk and diversification profile for my bond allocation.
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