Freedom56
Thinks s/he gets paid by the post
^^^ another reason to buy lower rated corporates is they can benefit from upgrades.
True, and AA and AAA have one way to go, down.
^^^ another reason to buy lower rated corporates is they can benefit from upgrades.
Anything BBB+ and above is considered conservative in the financial and technology sectors. I would avoid AA and AAA corporates as they are overpriced and really don't offer any more security over BBB+ and A rated debt. Their yields are similar to CDs so there is no point in buying them over CDs. Stick to money center banks like JP Morgan, Bank of America, Wells Fargo, Citigroup or brokers like Goldman Sachs. The six major banks in Canada are extremely safe investments. E-commerce companies such as Ebay are also safe investments for corporate notes/bonds. Avoid the retail and mall sectors. There are far too many retail stores and malls in this country. Also avoid consumer discretionary companies. Callable bonds do get called when the issuer can refinance 1.5-2 points lower. If you want protection from callable bonds, there are many that are "make whole call" which forces the issuer to pay the holder a premium over par for the remainder of the term of the bond minus the prevailing treasury rate.
If you are starting out. Play it safe with A/BBB+ rates bonds from the major financial firms. Stay short term 1-3 years or 5 years maximum. New issues should revert up to the 5%/5 year coupons that we saw in June for new corporate issues. These issues rarely trade as most investors hold them to maturity and the issue sizes are relatively small but they occur frequently. At 5% coupons you would be earning twice what a typical bond fund yields but with capital protection that a bond fund will never provide.
You have to wonder how often funds are getting stiffed on coupon payments. Some funds have almost 10,000 holdings and in the sleazy world of Wall Street with employees acting as auditors glued to their smartphones not their work, there has to be a lot of misappropriation of coupon/dividend payments. I had a case where DTC shorted the coupon payment by 8% which prompted an investigation by the issuer and then the SEC and the problem was resolved. The investigation cited a clerical error. However, I wondered why the same clerical error did not occur for the ten prior payments. An individual investor can keep track of their coupon and dividend payments, I wonder if all funds do? Given that funds lose so much "other peoples money", do they even care?
Anything BBB+ and above is considered conservative in the financial and technology sectors.
We’ll, I just put in the largest bond order I’ve ever done. CUSIP 22550L2J9, a Credit Suisse bond at $99.636 maturing in August 2024 YTM ~4.939% with a 4.75% coupon Rated A by S&P
With 250 min (at least that's what I currently see) that is quite an order!
Hasn’t filled yet. My first try was for a specific ask, but someone beat me to it. So now I have a limit order in to see if someone bites.
Hasn’t filled yet. My first try was for a specific ask, but someone beat me to it. So now I have a limit order in to see if someone bites.
And that is why we diversify. Do do happens.
Many of the better yielding bonds/notes have minimum buy restrictions of $100K-$500K. I have one position with JP Morgan at $500K and recently TD Bank's issue had a minimum buy of $100K for a 5%/5 year coupon note that I bought. Both are pretty solid financial institutions. Also with corporates, there are a very limited number of issuers that are worth buying.
Of course they do. I see this stuff every day, but if you are willing to shave a bit off the yield, you can get smaller lots. I have over 200 positions, none more than $45,000, vast majority $10,000 - $20,000. No way would I put $250,000 in one bond.
I have gone as high as $800K with one issuer. It's pretty difficult to find 200 different issuers in the corporate bond world that offer reasonable yields. The vast majority of issuers are in sectors that I would never touch.
For one who does not need the income and plans to hold til maturity does coupon matterRemember to ease into a ladder as the Fed continues to raise rates. Keep some "dry powder" for this November and December as it is tax loss selling season and we will likely see some acceleration in redemptions of bond funds. This will put pressure on prices of individual bonds. The low coupon bonds will get whacked the hardest followed by the higher coupon bonds. This creates opportunities for individual bond holders.
Remember to ease into a ladder as the Fed continues to raise rates. Keep some "dry powder" for this November and December as it is tax loss selling season and we will likely see some acceleration in redemptions of bond funds. This will put pressure on prices of individual bonds. The low coupon bonds will get whacked the hardest followed by the higher coupon bonds. This creates opportunities for individual bond holders.
For one who does not need the income and plans to hold til maturity does coupon matter
I thought of starting a new thread, but this is a very "bond-centric" post and this thread is pretty active, so here it goes:
I sat on this blended age-based fund for way too long,
Thanks,
So that is a Target Date fund and doesn’t fit too well in this thread. The target date for this fund is 2020 so the asset mix is what the management deems appropriate for someone 2 years into retirement ( or more accurately taking withdrawals from the fund for two years). Is that your situation? I think you answered your own question.
Question Freedom. DH and I have recently purchased several Canadian bank bonds in our IRA's. (We generally hold positions that will mature in a 10 year ladder that match our RMD's with the rest invested in equities.) I wondered recently if we are sacrificing income on these issues due to foreign taxes withheld that we can't claim a foreign tax credit on due to their IRA status. I figured you'd know.