Bond Discussion

This is a page where bonds can be discussed. I am thinking primarily $1,000 issues which are of interest to folks.

Like the other discussion pages posts will stay intact for a number of months.

1,286 thoughts on “Bond Discussion”

  1. MUC, Blackrock’s California Munis yields 5.9% tax free and trades @ 10% discount.
    Depending on your tax bracket, this is much higher than most securities in III.

    If you assume rates are not going to rise significantly while you hold MUC, isn’t this too good to be true for CA investors? Even better, if rates begin to drop, then MUC will start to raise in value too.

    Besides the interest rate risk and the risk of Blackrock going bankrupt, what are the risks here?
    If you are in CA, why would it be wrong to say “just put your $ in MUC and forget about prefereds”?

    (reposted in the Sandbox)

  2. Just a heads up I’ve seen a few decent Muni Offerings the last week. FC, I think we were chatting about these a few months ago.

    More specifically, I run a screen on Fidelity for 4.1%+ AA YTW issues. I’ve bought 3 issues, all with similar characteristics:

    Massachusetts GO Consolidated
    YTC ~4.25%
    YTM ~4.6%
    7+ years call protection
    ~2050 maturity

    My assumption is that they will all get called… and if they are not called, I can live w the YTM.

  3. NEW 6% coupons Selling @ PAR:

    Jefferies Finl Group 6.50%
    47233WHY8
    02/18/2045
    BBB/Baa2
    call protection 1 Year

    JPMorgan Chase & Co. 6.05%
    48130CYY5
    02/27/2045
    A/A1
    call protection 2 Years

    Deutsche Bank Aktien 6.00%
    25161FM47
    02/18/2035
    A/A1
    call protection 1 Year

    Ntnl Bank of Canada 6.00%
    63305MCH2
    02/24/2040
    A+/Aa2
    call protection 6 months

    The Goldman Sachs Gr 6.00%
    38151FEM1
    02/14/2045
    BBB+/A2
    call protection 3 Years

    Bank of America Corp 6.00%
    06055JJY6
    02/27/2045
    A-/A1
    call protection 1 Year

    1. I like the new JPM preferred over these. Higher coupon for 5 years and then it resets off 5 yr treasury. At some point the national debt will drive rates much higher. I worry about getting stuck in these and them not being called because the rates are too low. Sure, reset rate on JPM is too low but better that then just fixed rate. Thanks for posting JPM preferred. I own C also with reset rate.

    2. How does one reliably find if the distributions are potentially qualified dividends (if held proper 121 days) or Interest?

      eg. Citi 7.625% Coupon cusip 172967 PE5 or Citi 7.125% Coupon seriese CC cusip 172967 PK1 I bought last year turned out to be BOND INTEREST and not dividends!

      1. According to my Schwab history, 172967PK1 from Citi is a qualified dividend. This is posted on my 11/15/2024 transaction when I received payment. You should challenge your broker classifying it as bond interest.

        I use a general rule of thumb. Baby bonds (junior subordinated debt) almost always have an expiration date. They are NOT dividends – they are interest on bonds.

        Preferred issues rarely have an expiration date unless they are a “term date preferred” which is a small part of the preferred market.

        This is why when people post that the date on baby bonds is too far in the future, I occasionally answer that it is shorter than preferreds which never expire. Both are generally callable and I see no history (open to seeing it…if somebody has data) suggesting preferreds are called more frequently that baby bonds.

        Each investor has to make their own decisions to make.

      2. MSquare, I noticed Interactive has this listed as bond interest paid when I bought it. Who is the broker?
        This is a qualified dividend without a doubt!!

        1. BTW, there continues to be a disconnect w the $1000 and $25 markets.

          High fixed coupons are overbid for the $25 issues. See SOJF as an example. My guess is the Citi and Sempra issues would be well over par.

          Low coupons are underbid on the $25 market. This includes fixed or fixed to reset/float. My assumption is that retail is more focused on current yield, not YTC or YTM. Sorry guys and gals, no offense! I am retail as well!

      1. that CITI one looks good but I think when I called they wanted 200k minimum. the new SS one is 213bps T5 and the one last year is 262T5, which makes me think two things – that’s not great, and the other more attractive ones will get called (??) if the market will price it at 213 now.

          1. I did. I’m not sure it’s 250k but it’s more than the 50k I entered, which drew a message it would not execute against the order I was trying to fill against and indeed did not. That was the case at Interactive with quite a few of the C
            preferred offers.
            $250 has been the min on a lot of bonds offers. There was a higher offer against which I executed that did not have the minimum

            1. Hmm, I’ve bought 3 different C pref issues in 10k slugs that last couple weeks on IBKR, so my advice is to keep an eye out and you should be able to trade lower than $50k. Sometimes the offer has a min, but then I just wait until a lower offer is displayed. the $5M offers are often fake.. or they are the market maker who can decide whether to accept or not. I don’t know the exact details as this info is from a friend who trades instl FI. He tells me about all the games they play w the electronic networks to get the price in their favor.

              There are 3 size issue constraints I’ve run into:

              1) Min issue size displayed in the prospectus. For instance, the latest Cobank issue only permits a min of $200K (or was it $250k?), same w a recent TD AT1 issue.

              2) Min offer size required by the seller – e.g. $100k or greater

              3) broker restraints such as min $50k face value for bonds not in inventory traded via Fidelity bond desk

  4. Today, I bought the Enstar 5.5% (BBB-) at $97.028. Yield to 1/15/27 call is 7.12%. 5-year T reset plus 4.006% 1/15/42 maturity cusip # 27360AAB6

  5. HY Bonds. Thus far I have done well with these bonds. FYI, I get great insight with Bloomberg Legal subscription. I read two weeks ago MPW was close to refinancing its short term debt. I immediately bought the bonds. Now they are being redeemed at par. I put those funds into the long term MPW bonds. The bonds are not collateralized as the new debt refinancing got first liens. I will be watching the MPW news. It now has a few years to improve without debt. I did the exact same on NFE and received par at a great profit. Took that money and put it into NFE long term and have a good gain on that. I have made a great return on Bloomberg Legal. subscription cost. If one intends to play in high yield, I find it a great resource.

    1. TNTowanda, which brokerage are you using to buy HY bonds? My accounts are with Fidelity, and they have a limited number of issues available to trade in the HY market.

      Any experience with other brokerages with a larger HY market available?

      1. Coupon, I use IBKR for bonds only. I can leave limit orders at the price I want. Also see the bid/ask. I don’t think it is intuitive to use though. I also bought their stock and it has been a winner!

        Schwab remains my “go to” as I love their customer service. My advisor knows I pulled some of my portfolio over to IBKR due to their superior bond service. Hopefully, the other brokerage firms will one day compete with IBKR on bonds.

  6. I just started delving into bonds (usually I buy new treasuries). When i purchased a Corporate bond I had to pay the accrued interest. My question is when I import from Fidelity to Turbo Tax will it take care of the interest paid by me or will I have to hunt down where to enter the accrued interest into TT?

    1. Lib,
      I know a blogger who insults people over questions like this by saying,” If only there were a way to get the answer to that…..” and then he posts this:
      https://letmegooglethat.com/

      But, I’m not him.
      I think it does add up accrued interest and puts it under a line item called “accrued interest paid” or some similar title. I’ve got plenty of individual bonds I’ve bought and I download Fidelity and Schwab, and I’ve never had to calculate the accrued.
      Best, LT

      1. I did google it but I could not get a definitive answer. I figured a lot of people here by bonds and pay accrued interest and use TT. I don’t think it was an unreasonable question.

        1. I found out the hard way last year it doesn’t import to TurboTax automatically. It is a line item on the 1099 for accrued interest paid, but then you have to manually find the special situations checkbox in TurboTax to enter it. At least I did last year.

          1. IIRC, the H&R Block software handled it correctly last year. There is less handholding with that software though so it can have a learning curve, at least that was my impression when I switched over to it years ago.

            Curiously, Fidelity gave me free TurboTax last year so I tried it just to compare results and this go around it seemed less intuitive so maybe it is all in what you are used to using.

        2. Didn’t mean to insult you; I was just pointing out something funny a blogger does.
          I use TT to get an idea where I’ll end up…go through and download what I can…prob spend too much time on it…then give it to a CPA in Chicago who has been handling traders and trading firms for years because my trading is mark-to-market and allows me to deduct expenses and net losses, while also maintaining investment accounts treated like regular retail accounts.
          Now that I reconsider, Irish is correct . There’s a line item for accrued interest paid but I didn’t realize it was a special situation.

          I spend way too much time on TT

          1. LT, I am asking for my information only. How does mark to market help you? My pennies have mostly been made by buying distressed firms, then selling. Putting those gains into a great compounding mega stock. If I had to mark to market, I would be paying more taxes.

            1. TNT,

              MTM allows you to deduct net losses, if any. It does end up reclassifying gains as ordinary that might be treated as capital gains, but the point of MTM was for a trading account. It was a lot more important when I traded full -time and used lots of leverage.
              I keep investment accounts like Fidelity and Schwab and use one account at IB as MTM. I set up another there for investments too.

              I knew a trader who had a $3 mill gain on which he paid ordinary income tax one year. His trading firm changed accounting methods the next and reported stuff as short and long term cap gains. He proceeded to lose $3 million but could not carry that back against the gains. oops. No idea where he is today but he was mostly gambling long with the firm’s leverage

              Mark-to-market mostly helps now with deducting expenses. I get a small home office deduction I could care less about.
              So, I end up with my trading profits on a form 4797. and expenses on schedule C. The schedule C never has income on it . That’s actually the correct way. I’ve had plenty of CPA’s tell me that’s not correct, but they have never read the IRS instructions for MTM traders.
              Same CPA for 20 years, handles trading firms and traders. The bill is high .

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