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.
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9/30/2023
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Recently issued on May 18, 2023:
FFCB 6.23% 05/24/2038 Callable
CUSIP 3133EPKT1
Maturity Date 05/24/2038
Coupon Rate 6.230%
Coupon Frequency Semi-annually
Callable Anytime beginning 08/24/2023
Price $100.00 Until Dated Date 05/24/2023
FFCB called the 6.9% bond last week. They still have several bonds above 6.23%, including 6.64%, 6.54%, 6.45% 6.32%, 6.25%, etc., so I don’t it to be called on 8/24/2023, but I would be surprised if it survives more than 1 trip around the sun.
Not seeing this at Fidelity
Just showed up this morning on Schwab. Wife encountered a CUSIP glitch when she placed a small order, but I had no problems at about 8:45 a.m. pacific time.
It’s on Fido now
No illusions that it will not be called. However; looking at it as a 6 month issue, it blows away the same maturity (6 month) T-Bill.
Recently issued:
FFCB 6.1% 05/10/2038 Callable
CUSIP 3133EPJA4
Continuously-Callable on 08/10/2023 @ $100.00
S&P Rating AA+
Moody’s Rating Aaa
Coupon Frequency Semi-annually
Price of new issues stays at $100.00 until about the start date (May 5). Afterward, they have typically gone up about $0.10 to $0.30. FFCB has several outstanding bonds above 6.1%, so I don’t expect these to be called soon, but I also don’t expect them to make it to maturity (IMHO).
FFCB has several bonds with yields between 6.10% and 6.98%. They have announced that they will call the 6.98% bond (CUSIP 3133ENY95) on May 9.
Bought some-
Oglethorpe Power Corp (Utility) bonds today.
CUSIP 677050AJ5
Coupon 4.20
Current Yield 5.33
Yield to Maturity 6.061
Price 78.797
Maturity 12/01/2042
Rated Baa/BBB+
Oglethorpe seems to be on the verge of powering up two new nuclear power plants- the repeated delays and the hemorrhaging of money may finally be over. DYODD
When I am looking at a particular bond on EMMA, how can I tell whether it is insured?
For example, I was poking around looking at the the Maine Housing Authority bond mentioned below, CUSIP 56052FA88, EMMA link https://emma.msrb.org/Security/Details/A3E1937002111E5EECE6E727883934E67.
Can’t for the life of me see anything about whether that bond is insured, except indirectly (the Compare tab seems to imply that the bond is not insured).
I’m sure I’m missing something obvious, but would appreciate any pointers.
Bur, instead of going straight to EMMA, I suggest using your brokerage screener and only looking at insured bonds. I am assuming that most screeners have that click box. Some screeners also tell you which company is the insurer. After that you can look at the prospectus on EMMA. Normally it will tell who the insurer is, but you have to be careful when reading the prospectus. Let’s say the prospectus is for 10 different CUSIPS, different coupons, maturity dates, taxable etc. In some cases, only a portion of the listed CUSIPS are insured.
Under EMMA, you go to the “Disclosure Documents” tab and the prospectus is the first document listed. The bond in question, CUSIP CA3000CC3, is not insured, but it covered by two different reserve funds. I would rate the risk of default as very low.
The two main insurers that are still writing new coverage are Assured Guaranty (AGMC) and Build America Mutual (BAM.) National (NATL) is in runoff and is still paying 100% on claims, but is no longer writing new policies. Many older bonds are “insured” by defunct companies which may or may not be money good. Beyond these three, you have to do a little research to determine their status. Also many school bonds are covered by state funds. They do not call this insurance, but it has the same end result.
much obliged
4.75% for federal tax free AA rated. Probably gets called in 10 years. I’m not a muni expert but this seems great. Available as new issue through tomorrow. Does anyone know why these housing social bonds tend to come with high yields but great ratings?
MAINE STATE HOUSING AUTHORITY,
MORTGAGE PURCHASE BONDS, 2023 SERIES C (SOCIAL BONDS)
CUSIP CA3000CC3
Pay Frequency SEMI-ANNUALLY
Coupon 4.750
Maturity Date 11/15/2053
Insurer N/A
Obligor
Material Events NO
EMMA YES
Bond Type Municipal
Interest Accrual Date 05/18/2023
Security Features
Use Of Proceeds N/A
State ME
Federally Taxable NO
Subject to Alternative Minimum Tax NO
Minimum Investment Amount 5
Incremental Investment Amount 5
Marginable NO
Original Issue Discount (OID) N/A
Escrow to Maturity NO
Delivery BOOK ENTRY
First Settlement Date 05/18/2023
Trading Flat NO
Ratings
Moody’s Rating Current
Effective Date
Rating AA1
04/17/2023
S&P Rating Current
Effective Date
Rating AA+
04/17/2023
Coupon Information
Coupon Type FIXED
Current Rate Effective Date 04/17/2023
Here is prospectus.
http://prospectus.bondtraderpro.com/$MEHG23C.PDF
Ok, one more post. Sorry.
I must be missing something because these bonds seem too good to be true. Maybe, the principal will (could?) be paid back early as mortgage holders pay off their principal? The wording in the prospectus clearly states they are call protected for 10 years but then lists special redemption features and lists principal pay downs.
The higher yield makes sense if prepayment risk exists.
Also, some quick googling brought this up. Apparently these bonds are more popular to issue after this law was passed.
https://www.ncsha.org/wp-content/uploads/NCSHA-Affordable-Housing-Bond-Enhancement-Act-One-Pager-2022.pdf
Maine, it is common for mortgage bonds to have special call provisions earlier than the stated call. I see them all of the time when looking on EMMA. Personally when I see a mortgage bond, I IGNORE the stated first call date. Pretty common to see calls done many times per year on mortgage bonds that have underlying high interest rate loans. When everybody and his dog could get a 3% mortgage in 2021, there were a lot of calls. Anybody’s guess at to whether the mortgages underlying these bonds will be called early due to falling rates. Obviously you will have some properties sold where the loan is paid off early.
So the “will they be around for at least 10 years” amounts to an 10 year forecast of the 10 year US Treasury. If you buy it at par for a new issue, it is not much of an issue. If you buy it above par, which means it would have an above market coupon, it CAN be a large issue since you might have a capital loss on the principal.
Thanks Tex. I am haven’t traded munis in over 20 years so I am rusty. Appreciate the info.
Based on your response, it seems like principal will definitely be paid off, but it will be lumpy, couple times a year, depending on what rates do. I guess I still like them at par.. but less so given this unpredictability., esp if rates drop and it’s fully paid off in a few years.
I am familiar with with MBS pass through market where you get some principal every month. It seems like these are technically “bonds” not “‘mortgages” and the issuer has the election to pay down as much or as little as they desire.
Maine, the mortgage bonds I most commonly see are not pass through where everybody gets a drib or drab of principal. The more common is where say $25k gets paid off in $5k minimum increments. They do it just like a sink, by lottery assignment for who gets paid off. So on a given call you might not have any quantity paid off. If you did, it would be in multiples of $5k.
Here is a good example for some New Jersey Housing bonds. This is the “Special Optional Redemption” notice for 8 different CUSIPS, with the highest coupon being 1.679%. The owner of those would be jumping for joy, because they were trading at say ~ 93 and got called ! par (100).
https://emma.msrb.org/P21557285-P21203206-P21623233.pdf
Thanks Tex!
Yeah, that bondholder got a gift.
What are we looking at on FINRA Bond Site? What are ya after?
Somebody pointed to an example recently on a FINRA page. I think this answers that question where there were blanks on the Trade History page:
– TRACE system displays the LOWER of the YTC (retirement of that bond before maturity date) or YTM. It is NOT a Current Yield on interest payments if held to maturity only.
– NB: YTM (FYI: if it is non-callable) will includes ALL potential returns which will INCLUDE the potential capital gain/loss on a bond at above or below par at call or maturity. Nice little built in calculation!
– Many bonds will show if they are callable on the FINRA site under Put & Redemption Provisions below the chart.
– For certain variable rate or defaulted bonds trading flat or accrued interest no yield price will be shown.
– Here’s a handy drop down favorite to keep rating equivalencies:
https://www.researchgate.net/figure/Moodys-and-S-P-alphanumeric-ratings-conversion-into-numeric-values_tbl1_23722339
DBRS has one on web too.
>>> Please use Tim’s $1,000 Bond page here to share targets you may uncover….after your next fill! <<<
Thanks for the pointer to the rating equivalency tool, Joel. I had to chuckle: I developed the same idea keeping track of my bond portfolio in Excel (VLOOKUP is my friend).
The Bond Market is, AGAIN, flipping around and gasping like a fish thrown up on the bank.
I just prepped a What-to-do-with-Cash watchlist, by hand and eyeball, of approx 30 bond issues US and Canadian, all IG, differing industries, all at or below par (which can include callables). NONE are worth buying now, but I have some targets to shoot at next opp. I have a basic tactic laid out which may take a long time to watch , wait, pare profits esp on some mythical rate nadir and be ready for a final act in the play. I suspect it will be during a time of much grumbling, grasping and panic.
I do not have anything to offer as a buy prospect to y’all. I am not a flipper so that is another topic.
Joel it was mentioned that an enormous amount of bank CD’s are showing up in the secondary market as holders are getting nervous about their regional banks. I would assume your seeing banks bonds starting to sag but those don’t interest me.
Just read an article this morning on a road trip with the new all electric Toyota. Didn’t inspire confidence. Car & Driver says only 3% of all new vehicles sold are electric.
I would say oil and energy companies are going to be around for a while and so are their bonds.
I don’t share your conclusion that the influx of CDs on the secondary market is indicative that investors are worried about the banks that issued them. It seems just as likely that investors are selling those CDs to move capital into riskier assets now that danger of immediate banking collapse has passed. In any case the risk to CDs is negligible, even at the banks with higher risk profiles.
Not my conclusion CW just one way to look at it.
Not sure about investors moving back into riskier assets. The preferred’s I have been watching have moved up off their lows and they may have more room to go but peoples appetite for risk doesn’t seem to have grown.
The least little rumor like we have seen when recent buyouts have occurred has sent holders of preferred in those companies bailing ship.
That’s all they talk about over on SA
I’m with CW.
The only risk with a FDIC insured CD is if it is callable and can be bought back early.
I personally don’t see any way a CD will not be paid when it matures whether the bank has failed or not.
Westie, I own all sorts of CDs from various banks, and am not concerned. However, if a bank goes under, the CD runs the risk of being redeemed immediately or offered a lower term by acquiring bank. Also there could be lag time where no more interest is accruing before FDIC pays out if bank is declared insolvent and is not acquired. Its not causing me any stress though.
I peruse the secondary CDs and really have not found any real value there once the cost of buying is factored in since new issued CDs do not incur a transaction fee. So I have yet to buy a secondary issue.
Joel, I gave up looking at bonds for a while as it seemed prices had drifted back up closer to par and I wasn’t seeing anything I liked at Fido. I looked last week at TD and they seemed to have a better selection But that account isn’t where I have a lot of funds.
Thanks for the heads up. I might go back to looking.
eTrade has upped their interest rate on their savings account to 3.75% Great place to park $$$ while the market makes up its mind. I have a ton of Treasuries I entered from early Feb to early Mar and staggered at 3 month interval maturities – avg yield is 5.2% there and they start maturing this June out to June 2024. I’ll decided what to do with those funds as they incrementally mature. Bonds are going to be a big part of my targets.
still available at Fido, Callon Petroleum Cusip 13123XAZ5 I bought 2 months ago and price has been holding steady. This is only rated B+ Hold to maturity for 3yrs 3 month for my high risk account
Bought some Callon Petroleum notes today at TDA. Fits my needs. Thank!
I bought my 2nd tranche of short term FIFTH THIRD BANCORP 4.30% coupon due 1/16/2024 @$97.65 (my first buy a few days ago was at $97.349) rated BAA1/BBB stable on both rating agencies YTC 7.655% 12/16/23 at Vanguard and YTM 7.295% CUSIP 316773CP3 this is a $750MM sized bond. I have done an extensive search of corporate financial industry bonds and have already a large size purchase of corporate bonds in (CMA) Comerica Incorporated and was looking for more happiness in the bank bond area while yields are high.
This corporate bonds fits MY portfolio and risk level, please you are the only one that should make decisions for your own portfolio soooo do you own deep dive into due diligence.
Protect your freedoms at all costs. None are more hopelessly enslaved than those who falsely believe they are free.
I am Azure
Am I crazy for liking this issue?
Wells Fargo 3.9% fixed rate reset preferred, Resets to 5 year treasury + 3.453% in March 2026. Qualified div
$1,000 par, trading on interactive brokers today at $87.75, or $8,775 per bond.
Current yield is crappy at 4.4% but the yield to call is great at 8.5%.
Forward curve has the 5 year near 3.5%,
3 years out, so that’s a coupon of 6.9%. This makes me think that a call is the base case.
Just focusing on rate risk, a worst case is that the 5 years comes in a lot, say to 1%, resulting in a coupon of only 4.4%. That’s actually not the worst thing in the world if the 5 year is at 1%. You also
get another chance at it resetting to a better rate in 5 years.
BTW, other interesting “safe” options include WFC-R, RIV-A, and EP-C
https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/preferred-stock/series-bb-prospectus-supplement.pdf
FINRA page for this one
https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C978237&symbol=WFC5114143
Isn’t WFC-R strictly better? Straight yield on that is over 6.5% right now, and the call and float is earlier. Likely to be a much more liquid thing to trade into and out of as well.
Justin, yes I like R as well. The bond just has a lot more upside if WFC ends up calling them both.
I was looking at something similar in a ZION bond but I would consider it riskier but what I liked about it was they have been calling it. Just wasn’t offered on Fido
Maine, I’ll make a comment. I think the Fed is eventually going to drop rates and “allow” another round of refis, but it will not be in ZIRP range. I’m chart gazing at a reversion to the top of the last,first wave up which took us to: 2% as a potential lowest point of wave two. When??? Everybody will be scrambling to refi and I don’t think you are going to see many 5 year FRR.
That means I am NOT implying anything else about their motives or policies.
Between now and then, that may be the last best chance to rearrange a portfolio since there WILL be a third up wave off of that 2-2.5 % low and EVERYONE will be screaming with fear again.
Inflation IS not dead and America can not effectively set global policy anymore.
PS I loaded up on a double position using spare change divies of EP-C in slivers during the downturn. Maturity in 2028 maybe a good time to move into long term bonds and just wait for my ride in the hearse? If the long bond and dollar go to sht in five years I’d like to see double digits bonds?…Naaaahh. A boy can dream.
Another TD Bank Note at TD Am:
13-month, 5.35% Note;
Settlement Date: 4/14/23; Maturity: 5/14/2024
pays monthly
Rated Aa2/A-1+ (Moody’s/S&P)
Not “bail-inable” debt (see bottom of page 3 of Prospectus)
Callable 1/14/2024 and monthly thereafter
Please do your own deep due diligence
What is the risk of investing in 10 year CD at 5.3% CELTIC BANK. It should be FDIC insured if bank goes under.
Once the FED rates go down, these should increase in value ?
Ravi, you didnt mention but I suspect its a callable CD. So if yields drop appreciably you wont get capital appreciation. You will get a notice for redemption on one of the redemption dates. Basically they toss the asymmetric risk onto your lap. If yields rise, you get to keep it, if yields fall you are most likely looking for another investment after they redeem it. Typically these type have a 6 month to 1 year call protection.
Every Broker-sold 10 year Celtic Bank CD issued in 2023 is callable, so it is unlikely they would increase much because of the call risk. If this is a non-broker CD, the disclosure statement would lay out the terms. But under the deposit limits, yes, they would all be insured.
Thanks, looks like its callable after 3/2024 .. so capital appreciation is low likehood
I hope those more knowledgeable than me can help with this question. I am trying to research the Two Harbors CUSIP 90187BAB7. As it trades at a larger discount that other Two Harbor bonds, I know there must be more risk. I just cannot properly determine the risk. The bond is puttable upon covenant violation and seems to be puttable to another CUSIP at predetermined rates. I cannot locate exactly what one would put if covenant violation occurs. It doesn’t seem to be the common stock.
Especially after CS bond situation, I hope to understand these type of bonds. TIA
What other bonds are you comparing it to?
The remaining Two Harbor bonds. These yield much less. I assume it is the put that is viewed by the market as higher risk. TIA
Two Harbors doesn’t have other bonds outstanding. I think you are mistaking bonds from a different issuer. Check the CUSIP of each. Two Harbors’ issuer code is 90187B. if the other CUSIP’s start with something else, they are NOT a Two Harbors bond.
Thank you! New information is much appreciated. I always try to read your post.
Ok you want safety…Who’d be buying beyond the 3,4,5 year Gov US bond here?
Go ahead and crawl into a hole and pull it in behind you, but…
In many ways, Powell may be correct.
Joel, that should have been done a couple weeks ago when the yields were all nice and juicy before they collapsed.
Grid, That’s what I mean, who’s buying now? Somebody’s at Bid.
in the last year, I have carefully constructed an investment strategy based on the good advice from this website:
1. Sell all perpetual preferreds, especially low-coupon perpetuals. Buy FTF preferreds as rates have increased.
2. Buy short-term CDs and treasuries. Roll them into short-term higher yielding CDs and treasuries as they mature.
3. As the top of the rate curve gradually begins to flatten, begin to buy long bonds and long agencies, starting out at 2 to 3 years and moving out to 5 to 10+ years. Try for 6.5%+ YTMs.
4. Begin selling some of the FTF preferreds, and start buying term and perpetual preferreds that have been knocked down by rate increases. Pick up IG and non-IG with a plan for long-term holds for capital appreciation as rates drop.
It has taken the market exactly 5 days to nearly destroy this plan, although some pieces of it have been executed. Now, the only plan that I have is to lock in anything that is safe (thanks to CDs that haven’t dropped as fast as treasuries) and hope that the banking industry holds together, although there is still some hope for Step 4. On the bright side, my initials are not JP, and I don’t have a nearly impossible and thankless job.
g2,
So sorry for your market challenges and disappointments. Very frustrating when it appears you put so much into the construction of your holdings. And yes I agree we are fortunate to be surrounded by so many talented and experienced co-IIIers!
Just an observation, as we each need to make our own calls:
1) One common item in your 1-4 notes above jumps out – its all based on rate predictions. Especially us guys try to control too much at times and when we can’t control, we predict. Neither is very effective and as evidenced in the last week; predicting is just about 100% unreliable. Yet we see it over and over and over. And I’ll “predict” we see it again before the day is done.
Focusing on safer, low risk (in all its many forms) and low drama holdings does not have to equate to CDs. Staying in the safer, low-risk arena when the riskier boundary of the market is partying like it’s the 1920s might prevent some of this malaise. And we know how that ended.
2) Being simulataneously beholden to absolute account balances and building sustainable income. I find this an impossible task.
Just me, though if holding high quality preferred issues, the account balances are meaningless. I mean that literally. I rarely notice. I do not care. It’s all about the annual income. My “account balance” is one of valuation – let’s call it the PV of the future “annuity” from the preferreds. And looking today, the balances are up sharply since Jan 1, more so after this week’s buys. The preferred annual income has gone up every year, every month and every week no matter what the market – for years now and will cross the century mark in the next two weeks.
Especially if holding high quality issues, you can average them down over and over – and your income will continue to rise. You cannot do that with higher risk issues.
Another thought, consider arbitraging issues not for a dinner, but for a position that will yield a dinner every year forever, or for higher IG with similar yield.
I actually look forward to sell-offs like we just experienced and 80% of holdings were bought exactly during these down-drafts when predictions and the market sell-off itself said the opposite.
The much trodden-upon high IG, low-coupons are a poster-child of sort for this – as they are some of my best performers with a YOC around 6.5% for A/BBB+ paper. Why would we ever flip them for a one-time gain? Instead, if the price drops below basis – we can buy more every time they make themselves available at the new lower price.
A thought on CDs – they do offer a safe haven and I’ve got them heavily laddered out month-to-month – but only a portion as they too have a risk of sorts in reinvestment at term – as we have no idea what the IR landscape will look like at that time. We really don’t.
Best wishes with your investing.
alpha, Great modeling, sounds like it was earned by self-realizations over time!
If the banks could ‘invest’ this way, there would be no problems. There will be movement on regs and rules to create short term liquidity. I like the idea of Industry Reinsurance on liquidity created within the Industry, but as long as there are govt facilities, the banks will never do this themselves and guarantee their own survival and realities of behavioral actions. It’s like bad, rich frat boys. In other words they would be watching and policing each other. Those are the rules it looks like you have learned to employ and the way it works here in my own neighborhood.
Good advise and perspective.
Alpha – Thank you. Although I’m always open to a good market sell-off, I wasn’t ready for the mine field that banks have become because they were a big part of my plan, although I am looking at some of the perpetuals from the Big 10. Now I’m looking at my banking preferreds and bonds and wondering if I’ll need to go through bankruptcy with them, and I’m looking at my bank CDs and thinking about FDIC insurance. Since this is the bond page, however, I’m looking at a recent issue from Goldman Sachs:
The Goldman Sachs Gr 6% 03/22/2028 Callable
38150ARY3
$100.00 (will likely go up after issue date of 3/22/2023)
first call date 3/22/2024
$1,000 minimum
BBB+/A2
I don’t see it lasting past 3/22/2024, but it is 6% for 1 year (less the 1 week of waiting until 3/22/2023).
Still looking at other +6% bonds from the big 10 banks.
On the plus side, following the collapse of 3 banks and others teetering on the edge, I have learned that there is hope if anything should happen to my wonderful wife. I can turn to the rating agencies to write my online dating profile. I’m looking forward to my second life as a tall, handsome, young, and fit male with a passion for fine wine, gourmet food, dancing, concerts, and international travel.
One might consider Amazon as a resource. Today I saw it offered a 10% discount on its magic crystal ball!
2cali, for what its worth, I bought that Goldman Sachs bond you mentioned as well. A2, at least a yr at 6%. Seems like a decent strategy. Recently also purchased 6% TD Bank bond and a RY Bond at 5.5%.
My view is that the FED follows the Bond market, and the Bond market is now telling the FED that you are close to the end of the rope on these rate raises.
Laddering CDs monthly, to me is a sound strategy here as well as beginning to nibble at IG 6% ‘ish’ preferred’s.
goin2cali–I feel your pain as Bill Clinton used to say. Like you I though I had things kind of locked it and portolios were performing super through January and February. I remain in a very broadly diversified group of insurers and bankers but have bunches of CDs and treasuries–none of which I have ever owned before. I am still in the process of formulating my new plan–but with the number of items I have on my ‘don’t buy’ list it is becoming more and more difficult. Generally I don’t buy shippers, residential mREITs and most commercial mREITs–now add to that many bankers and insurance company’s and my potential universe is getting smaller and smaller. Mostly will hold money market funds with my dry powder until I get this figured out.
SPIRE INC BBB+
Coupon Rate 3.543%
Maturity Date 02/27/2024
Symbol SR4459178
CUSIP 84857LAA9
Callable Yes
Last Trade Price $97.43
Last Trade Yield 6.317%
What do you think about the Spire bond versus its preferred?
SN, You arent getting that yield Joel posted. That was some interdealer trade. That particular bond presently is priced at 5.02% and priced at 98.63. Unfortunately they post all the scam interdealer trades that give us false hope until we type in the cusip.
If you bond search under Spire keep in mind there are 2 separate types. Spire Inc. which is the holdco and Spire Missouri which is the operating subsidiary. Naturally the latter will have a better credit rating and thus lower yield.
Did not do enuf work, just posted a CD alt, but there you have the DD factor.
Gbird da Mahn there!
General Comments regarding Bond Laddering: Weekend reading stuff:
-Have gotten value from the articles regarding the considerations of building a bond portfolio found on Advisor Perspectives, which someone posted here a few months ago. Testing my biases and attitudes constantly.
https://www.advisorperspectives.com/topic/fixed-income
I particularly was challenged by the idea of losing the crystal ball when guessing what bonds will do at ANY point in the future, relying on reinvestment prowess, instead of buying when duration makes good sense. I have seen comments here where intuitively some are leaning into longer duration as a guarantee. I have held my nose on the coupons, 3.5 – 5%, and gone with some slivers (diversification) of below par, some way below par, which I am seeing as an automatic capital reinvestment into inflation at maturity.
Also, Check out the “hairy graphs” of rate projections by the pros have historically worked out here at : Chatham (another site referred here at III) :
https://www.chathamfinancial.com/technology/us-forward-curves
I suppose this could bell curve/revert, but how long am I going to be around?
– Seems like all allies (as in war allies) are being called to indirectly deliver support to the USD to retain command, instead of open declaration . The USD is setting global policy. All these billions of allies, including the bottom half of US citizens, are leaning into being the defenders of commodity trade supply/demand by taking a hit of some degree. This depresses oil, inflation trade and does in demand. Somewhere I think part of the interest rate/dollar policy is related to Cold War tactical maneuvering. Why hand Putin big trade surplus?
Seems the backlash at some point could be vicious, as in underdevelopment of resources. Staying barbelled into Oilys, Pipes, PMs (as high as I have ever held), PICK, and some target commodities where supply is now gone. All in all about 20% of portfolio._ Either that of follow Rid@ into CEFs.
– PS: Credit card debt passed 1 trillion $$ yesterday supposedly. This has been an unbridled PRIVATE stimulus which no one looks at in addition to Fiscal and Monetary levers. Watch those hairy-graphs if the bottom end of consumer DOES get destroyed.
When I looked at those rate projection charts sometime last year they showed we would be sitting at the peak about right now.
Now they put it at October. Which is just to say that no one really knows anything.
Great post Joel.
DoubleLine Capital’s Jeff Sherman breaks down bonds https://www.cnbc.com/video/2023/03/03/doubleline-capitals-jeff-sherman-breaks-down-bonds.html
I’m going to toss out an idea that will likely get me banished, drawn, and quartered by the IG purists. This is exclusively for anyone that has a little play money and likes the feel of the dice rattling in their hands without the unrelenting smell of smoke or the sounds of canned music.
RMR has a bond outstanding (not necessarily an outstanding bond):
THE RMR GROUP LLC, 4.5% coupon, matures 2/01/25, CUSIP 81618TAC4, BBB- S&P and Ba1 on credit watch (AKA junk), $5,000 minimum, current $94.66 but frequently drops to $93, YTM 7.56% but frequently clears +8%.
Why would any semi-sane person even consider this bond from the much hated and often maligned P****** family? Because I actually think they have sufficient assets to cover this bond at maturity in less than 23 months for the following reasons (please note that I am not recommending any other P****** investment, so put away the sharp knives and only administer a sound bludgeoning):
1. The RMR Group will get a large cash infusion from BP’s planned acquisition of Travel Centers of America (see SA article from Feb. 22, 2023). The bond prices have increased since the BP announcement. BTW, the many investors in TANNI, TANNZ, and TANNL do not get to join in the bludgeoning.
2. The RMR Group Inc. is a small-cap external property management company with a strong balance sheet of $564M of assets versus $195M in liabilities (except when they are plundered by ….. well, never mind). Property management is a low-risk asset-light business with limited real estate exposure, which may be some small comfort if things go south in the REIT world in 2023 as discussed in many recent articles.
3. RMR has another bond (4.25% coupon, 5/15/24 coupon, CUSIP 81618TAE0, same rating, current price $97.16, YTM 6.74% – seriously, nearly the same yield as some agency bonds at AA+???? Why???) that is only 8.5 months ahead of the 4.5% coupon bond, but has been consistently about $3 ahead in price. In other words, all other things being equal, the price on the 4.5% bond should exceed $96 to $97 in 8.5 months.
Yes, I do have a small amount of the 4.5% bond purchased at less than $92 with a YTM of >8%. If you possess a similar degree of insanity and wish to roll them dice, remember that it comes with the benefit of not needing to repeatedly wash your clothes or wonder if all disco music is terrible. Also, you might want to consider therapy (just kidding).
new issues on federal farm bonds are yielding 6.54% and 6.64% on 2034 & 2038 maturity. What is the likelihood of these being called in near future ?
My working assumption is that these will be called at first call date unless there is a further increase in rates. (I bought the 6.64% yesterday).
A 6.8% issue that I owned previously was called at first call date. However, a 6% issue I own is past it’s first call date and is still outstanding.
what is the maturity of the 6% which is past its first call date ?
I misspoke. It is a 6.3% 2031 issue (cusip 3133EN2R0). It became callable Feb 28.
do you have a cusp number for the fed farm bonds? tia sc
ravi
do you have the cusp numbers for the new federal farm bonds? If so kindly post. TIA SC
sc4,
Here are a couple of new ones at Fido:
3133EPCP8 6.54%, 2034, callable 6/8/2023
3133EPCQ6 6.64, 2038, callable 6/8/2023
I would love to go all in on these, but I suspect they will be short lived. But who knows?? Good luck.
Agreed that they will likely be called, but I don’t think it will happen this year as long as the Feds keep raising the fed funds rate. Since these are both recent issues, they are both at $100.00, so you still gain 6.54 to 6.64% annualized even if they are called. But there are other FFCB bonds at higher yields (3133ENY95 at 6.98% first call May 9, 2023) that will be called first and serve as the canary.
Full disclosure, I purchased over $200k of the 6.54% and 6.64% bonds on March 3 with the hope that they get called within the next year when fed funds rates are higher so I can rotate into longer bonds at higher yields. If they don’t get called, then it is a safe place to earn +6.5% if 2023 turns out to be a rough year. If rates are higher within 1 year, I might sell the 6.54% and 6.64% bonds to lock in some IG long bonds. I’ll keep doing this throughout the year as long as I can buy high yielding agency bonds at par, and I’m even selling some sub-6% preferreds near par to raise cash.
Welcome everyone to the year of the bond. Lock up those long IG bonds, sleep well, and go play. This is the time for income investors.
goin2cali and fryman all of these are coming up restricted 144a
The CUSIP you posted goin2cali isn’t coming up.
Am I to assume you need to call in for these or sign up at time of offer to get in line for them ?
Charles – I checked Fryman’s CUSIPs and they are correct on Schwab’s bond screener, although there are no bids/asks because the bond market is closed. Perhaps try again on Monday. Since these are both recent issues, many shares were for sale on Friday at $100.00, and I expect it to be the same on Monday. If you don’t use Schwab, then I can’t advise you. You may need to call in at your brokerage.
The CUSIP for the 6.98% FFCB bond is also correct, but I have not seen anyone willing to sell these on Schwab for a while, so it hasn’t shown up on their daily screener for the last month when I have checked. An individual search for the CUSIP shows the bond, but it doesn’t have any ask prices. Again, possibly try on Monday or call your brokerage.
Others here with more bond knowledge might be able to help. If you can screen and sort by YTM for agency bonds at your brokerage, these all might show up on Monday.
Best of luck.
Thank you goin2cali, I have been using FINRA to do my bond searches and I think I must not of cleared my search as the CUSIP you gave is coming up now and shows last trade 3/02/23 When I first started looking FFCB came up with 256 pages of listed bonds!
What is funny yours is listed as Government and the 2 Fryman gave as Corp. come up as 144a.
I have accounts at T Rowe, TD and Fido don’t like using T R as I have to call in.
search for FFCB bonds on their own site. (just replace the CUSIP in the link below)
these are in the pre-sale period, which is why they may be coming up as 144A on some bond platforms.
https://www.farmcreditfunding.com/ffcb_live/termsheet/3133EPCP8.pdf
Fryman
Many thanks the cusps. Good luck. best sc
Got some just <$100:
FFCB 6.540% 03/08/34
CUSIP 3133EPCP8
Don't care (for now) if these get called or not. I see this like a Tbill (knowing the limitations).
Thank you!!
Not very likely anyone else is involved but I got a notice from Fidelity today of a FULL CALL on ISTAR 5.50% due 2/15/26, CUSIP# 4501UCJ8. Call is supposed to be on 4/2 @ 102.75. I can’t find confirmation of this independently anywhere… Anyone seen any new release? What’s so surprising is that the shareholder vote for the merger with SAFE doesn’t happen until March 9, so if this announcement is accurate, then STAR is going ahead on a call whether or not the merger is voted thu by shareholders.. HOWEVER, Fidelity hasn’t any info on calls being announced yet on the other 2 unsecured STAR bonds with lower coupons and shorter maturities yet… Both those, however, have make whole calls, not fixed call price…. This is just not completely adding up – hence looking for independent confirmation if anyone’s seen it..
correction on CUSIP – 45031UCJ8
Notices of Conditional Redemption of Senior Notes – ALL 3 ISTAR UNSECURED NOTES:
https://www.sec.gov/ix?doc=/Archives/edgar/data/0001095651/000110465923028016/tm238307d1_8k.htm
On February 24, 2023, iStar delivered notices of conditional redemption to the trustee under the indentures governing each of iStar’s 4.75% Senior Notes due 2024 (the “2024 Notes”), 4.250% Senior Notes due 2025 (the “2025 Notes”) and 5.500% Senior Notes due 2026 (the “2026 Notes,” and together with the 2024 Notes and the 2025 Notes, the “Senior Notes”) to be delivered to holders of the Senior Notes on March 1, 2023. The redemption notices call for the redemption of all Senior Notes outstanding on the redemption date of March 31, 2023 at the requisite redemption prices set forth in the applicable indenture governing each series of Senior Notes. The redemption price of the 2024 Notes is equal to 100% of the principal amount thereof plus the applicable make-whole premium as of, and accrued but unpaid interest to, the redemption date. The redemption price of the 2025 Notes is equal to 100% of the principal amount thereof plus the applicable make-whole premium as of, and accrued but unpaid interest to, the redemption date. The redemption price of the 2026 Notes is equal to 102.75% of the principal amount thereof plus accrued but unpaid interest to the redemption date. The redemptions of the Senior Notes are expressly conditioned on the consummation of the planned merger of iStar and Safehold (the “Merger Condition”). The redemption date may be delayed, in iStar’s sole discretion, until such time as the Merger Condition is satisfied. There can be no assurance that the Merger Condition will be satisfied and that the Senior Notes will be redeemed.
2WR, sorry my friend but your CUSIP number above is 1 digit short
And quickly corrected just after the cutoff time for editing… It’s right the second time….
BTW, AB, don’t know how far out your muni bond ladder goes but Fidelity shows an $75,755,000 IOWA FINANCE AUTHORITY, SINGLE FAMILY MORTGAGE BONDS, 2023 SERIES A (NON-AMT) (SOCIAL BONDS) (MORTGAGE-BACKED SECURITIES PROGRAM) being newly offered…. AAA rated including a 2048 as 4.95% @ 100… Another term in 2043 as 4.75% at par… the issue supposedly has a 2053 maturity as well but probably of a different series and possibly taxable…. I haven’t seen that yet.
2WR, thank you so much for the great suggestion. Just so everyone here knows, municipal housing bonds can be called at anytime at par, so you really never want to buy them over par. The shorter bond looks outstanding and I will definitely see if our friends at Vanguard carry it on their offering page. All the very best for an awesome weekend! I’m in Kentucky and Alabama looking at more larger properties to grow trees 🌲 and prices are definitely heading lower since I was here just 7 weeks ago. You can just smell the desperation in the wind 🌬️
I cannot find these bonds yet at Vanguard. if you see a CUSIP, please post it here
Offering doc’s can be found here:
https://www.iowabonds.com/iowa-finance-authority-investor-relations-ia/i1103
Bondlink runs the site, so you have to register with them, but it is easy and free to do so.
I’m seeing 0H1000CH6 shown as the ’43 and OH1000CJ2 on the ’48. There are serials too.. They’re also showing the ’48 as not callable until 2032 but also an “extraordinary redemption” provision as well… I did not look for details, just saw this…. did not look at ’43 call provision
Like a bit of Red Pepper on your pizza? Here’s one to chew on which was immediately rejected as a SYMBOL for Watchlist at IB for being a convert (according to the bond desk senior broker).
Like each of us, if only we would work on our own OWN conversions! Ha.
TWO HBRS INVT CORP
TWO5120283
Corporate Bond
6.250
01/15/2026
89.000
10.800
90187BAB7
Thought about it:
TWO paying a common div.
A few paying preferred in the stack.
Short bond, under two years. Should be on the radar for redemption. (Funny how these terms are used by religions too!)
High yield.
Interesting info on their site too as to their actions.
Thin sliver? Trading recently with a 1 unit transaction.
YOU be the decider, usual disclaimers. I thought about five units, but am in the timeout corner…purgatory.
Back at the tax free income window, I bought at Vanguard:
Champions Municipal Utility District, Texas Unlimited Tax General Obligation 3.5% due 3/1/39 @ $88.776 YTW/YTM 4.482% YTS 4.53% CUSIP 15870QAX5 BAM Insured rated A3/AA
Wishing you all profitable investing and to achieve your goals, Azure
Hello AB-
I’m interested in why you bought this particular muni? I am just starting a muni bond ladder and am trying to gain all the insight I can.
Thanks
Hi Pete, I’d be glad to help you in any way I can. Is there a specific question about this bond? This municipal tax free bond; I needed this maturity date on my tax free ladder that goes out 20 years (ish). This bond is a GO (General Obligation/high quality), unlimited tax bond, utility bond (safe because people must have these utilities to live), has BAM insurance (2nd highest municipal bond insurance company after PSF) , is in a great growing state (Texas), 4.482% tax free is higher then similar bonds, much better deal then on this specific bond sales in the past etc etc etc Any questions would be welcome, Azure
Thanks so much for your reply. I am looking for non AMT, insured, GO bonds , and high IG only. I am going to do a similar 20 year ladder. I have not pulled the trigger on any of the many Texas bonds due to some of the small populations that must support them. I guess being insured should counter any small populations of taxpayers?
Pete, I believe I posted her a few months back that I NEVER buy AMT bonds and have only bought taxable municipal bonds a couple times in decades of buying. This is just 1 of 167 tax free bonds that I am long and have been very fortunate to never have bought a municipal bond that stopped paying because of a bankruptcy. I did have some Puerto Rico bonds, but they all had insurance (I like insurance) and never missed a payment or maturity date. Further, I completely agree with you; be extremely careful of the “numbered” debt that seem to be included in many of the Texas bonds, so those specific bonds are not as safe and I avoid them. My belief is that federal taxes must go substantially higher as the debt we have let Congress incur for all of us is staggering http://www.usdebtclock.org and many generations to come will get this “little” gift… It is one of the main reasons I buy precious metals
Emma is your friend….
emma.msrb.org
most recently issued bonds have posted their offering circulars there.
here is this one’s
https://emma.msrb.org/ES1010295-ER810604-ES1192725.pdf
Is this callable in 2024? that’s what note c seems to imply, so these two yields (YTW/YTM) should be different, (I am not sure what YTS means)
YTW/YTM 4.482% YTS 4.53%
YTS is Yield to Sinker; yield on a municipal bond that anticipates some amount of the bond may be redeemed on the next scheduled sinking fund date https://www.investopedia.com/terms/s/sinker.asp The Yield to call/YTC is 16.008% and so absurd I didn’t even include it in the description of the purchase. Also, the YTM/YTW are the same here because the bond was purchased at a discount to par…
On sinking fund bonds, does anyone calculate yield to average life these days? Back in the 80’s it was something worth knowing. Now that there are so many bonds trading at discounts, yield to average life would be a relevant yield on a bond again, especially one with a long sinking fund, meaning one that might start 10 years before maturity or so……….
Is the discount accretion to par tax-free or is the coupon interest (3.5%) the only tax-free portion?
Recent buy.
CANADIAN NAT RES LTDMED TERM NOTE
6.50000% 02/15/2037 CALL MAKE WHOLE
BAA1/BBB-
Price $101.80
CUSIP 136385AJ0
I am starting to nibble on some longer term bonds.
Yes, I officially started nibbling again, too. The long end is starting to cave a bit and creeping towards Oct. lows with the 10 year upward bias. You know some fixed IG preferreds are of questionable relative value when quality ute subordinated ETD is trading with a lower yield than senior
unsecured IG ute debt with duration limits is on the bond desk. I already had bought 2035 Empire District Electric last fall, but I topped the tank off buying 5 more with a 6.39% YTM this morning. Would like to see some of this ilk lean towards the 7% pole….Still its going to be hard to let go of the high yielding live floaters and rotate meaningfully yet though.
Would you happen to know if Foreign taxes get withheld from Canadian Bonds for US IRA accounts? TD Bank has a 5.4%, 1 YR, Aa2, not callable until Dec 2023 new issue I’m seriously thinking about purchasing. Think I’m going to hop on this one if no foreign tax withheld on those.
hi pig pile–
the answer is no, there is no withholding of canadian tax for bank interest from USA IRA accounts for USA citizens. i hold several canadian bank bonds in my IRA and ROTH IRA accounts. the USA has a tax treaty with Canada [and many other countries]. In this regard, see https://www.irs.gov/businesses/international-businesses/canada-tax-treaty-documents.
best wishes, avi
avi, thanks for your quick response. This is great info. As Gridbird can attest, I ran down a few non compliant Canadian preferred’s in my recent past and straightened out TD Ameritrade people on that treaty. I’ve never been made aware that it also pertains to bonds, but makes perfect sense.
Pig, I still dont know how you singularly got that accomplished. I remember you stayed on them like a pitbull though. I piggybacked off you as they reversed mine after you got them to change.
my 15 minutes of fame, I figured all the help you had given me up to that point needed to be reciprocated in some small way.
Youth hockey has stolen all my money and time, and maybe some more as it turns out, but I hope to be a more regular poster in these parts, great site here.
Good to hear, PP. Make sure you do!
I’m still searching for that low-coupon long bond and found this:
First Republic Bank
4.375% coupon
08/01/2046 Maturity
$76.51 Price
Callable at $100, but I’m fine with the capital gain
33616CAB6 CUSIP
BBB+ S&P rating
6.30% YTM
Drawback – $250,000 current minimum (2500 shares at $76.51 = $191,275) and only 1 seller on Schwab, and it was gone when I looked back on it. Might need to put in a bid.
Balance sheet decent, but could be better. Just had a common stock offering of 2.5M shares at $140 for $350M. Stingy on their common stock dividend yield of less than 1%, which is good for their bonds and preferreds. Market cap about $22B. 7 preferreds yielding about 6%.
Not bad if you’ve got $200k.
Just bought some Callon Pet. cusip 13123XAZ5 6-3/4% due 7-01-26
94.857 callable 7-01-2023 at 101.06 only B+ but with 3yrs I think I am safe
Going after short term high risk that Fido let me buy just a few
NRG energy 5.75% BB+ due 1/15/2028
Yes callable, next call 1/15/2024 @ 101.92
Full issue still outstanding so they haven’t done any calls yet. YTM 7.1%
Quite a few traded today.
Maxed out one small account at Fido. nothing left to trade.
Just bought in my IRA:
Phillips 66 Partners LP 3.75% due 3/1/28 @ $84.15 YTW 7.586%, YTM 7.586% CUSIP 718549AF5 this is a WR/NR non-rated bond because of the takeover. PLEASE due your own deep due diligence my friends, as this is just one of over 100+ bonds in my retirement accounts and I am comfortable with the risk level. NEVER blindly follow anyone that hides behind a keyboard telling others what to buy and sell. In Latin we STRONGLY 💪🏻 say, Mundus est pro eis qui pro seipsis putabunt
I am Azure
Since I looked on PSXP:
Moody’s withdraws Phillips 66 Partners’ ratings following exchange offering
10 May 2022
New York, May 10, 2022 — Moody’s Investors Service (“Moody’s”) has withdrawn all ratings of Phillips 66 Partners, LP (PSXP) following the completion of exchange offers which exchanged new notes issued by Phillips 66 Company (A3 stable) with identical maturity dates and interest rates for the existing notes of PSXP. Phillips 66 Company is a wholly owned subsidiary of Phillips 66 (PSX, A3 stable), which purchased all the outstanding common units of PSXP in 2022, such that PSXP is now indirectly, wholly-owned by PSX. Moody’s will continue to rate Phillips 66 and Phillips 66 Company.
The notes exchanges resulted in about 93% of PSXP notes moving to Phillips 66 Company.
Withdrawals:
..Issuer: Phillips 66 Partners LP
….Senior Unsecured Regular Bond/Debenture, Withdrawn, previously rated Baa3, on review for upgrade
….Senior Unsecured Shelf, Withdrawn, previously rated (P)Baa3, on review for upgrade
Outlook Actions:
..Issuer: Phillips 66 Partners LP
….Outlook, Changed To Rating Withdrawn From Rating Under Review
RATINGS RATIONALE
PSXP will no longer file financial statements. Concurrent with the exchange offer, PSX solicited and received the requisite consents from PSXP’s note holders to amend certain covenants, including eliminating separate financial reporting requirements for PSXP.
Moody’s has decided to withdraw the ratings because of inadequate information to monitor the ratings, due to the issuer’s decision to cease participation in the rating process. Please refer to the Moody’s Investors Service Policy for Withdrawal of Credit Ratings available on its website, http://www.moodys.com.
PSXP is an MLP formed by Phillips 66 to operate and develop primarily fee-based crude oil, refined petroleum product and natural gas liquids (NGL) pipelines and terminals and other transportation and midstream assets which are integrated with Phillips 66 assets.
Phillips 66 (NYSE: PSX), headquartered in Houston, Texas, manufactures, transports and markets products that drive the global economy. The diversified energy company’s portfolio includes Midstream, Chemicals, Refining, and Marketing and Specialties businesses.
REGULATORY DISCLOSURES
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website http://www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Wow, this is trading really wide of the Moodys rated parent companies.
I think these are the remaining Phillips 66 Partners LP Notes that for some reason were not exchanged for new Phillips 66 Company Notes? So they are obligations of a subsidiary with no public financials? (Would be expert market if traded with a ticker)
Az, Nice lead huh? Did, dig, dig.
That’s why I don’t like to post until I’m in….you’re in.
Joel, you are in? It’s interesting, I posted on another board years back about Kimbell (KRP) when the partnership (NO K1🏆) was trading at about $7 and added my email; I just happened to add their excellent earnings today here as well. EVERY TIME they hiccup, I get a slew of people emailing me thanking me or telling me about them buying and holding this security: I really NEVER intended for people to follow just what I am doing with my portfolio and truly hope people think for themselves. I retired in my 40’s years back after 24+ years on Wall Street and my track record with client asset management days are long over. I still consult to some corporate retirement plans, institution accounts, charitable organizations and very wealthy individuals that manage trusts, but usually I am apart of a team and my OPINION is only just that and I am scrutinized by the rest of the team(s). Ironically, yesterday afternoon I was in Connecticut discussing a client’s institutional energy fund. They asked for my top 3 securities I would recommend KRP and 2 others; EVERY member of the advisory team ripped me as they all had major issues with the partnership. Today, they come out with earnings and I got 2 of the members texting me to say they were sorry 🤐 Recommending anything to anyone online even when I (or others) are being paid is a no win game. People always focus on the bad picks and rarely focus on the mitigation of risk and asset allocations… Sorry for being sooo long winded
Az, First Ego response. Hey, I am totally healthy and hope you are too! A GREAT place to start.
If I couldn’t get in the door at least you did with some good karma you have garnered from your contribs on this site.
I will say, that I have now considered the Vanguard Account WITH the ability to ACH settled cash funds around. IB has a ticket open and I am hounding them again today with a formal letter ( Hey, lotta good that’ll do Chief!)
So I learn a new way to skin the cat, by skating. Glad you saw that the Partnership had been absorbed by PSX.
PS: Digging out some other goodies too….heh heh heh!
Will say the recent CN resets, WHICH I DID learn about right here at III, (THANKS!) have been very good to me this last round, several resets at the end ’22 and already four this 2023 with MFC-J just declaring with a 29.6% reset on coupon and IAF-J and TD.PF..J cued up this next five weeks. Still some room and maybe in MFC-K (reset in Sept ’23). Each brokerage has its strengths and biases.
Joel, I truly appreciate your response. I get plenty wrong too (just ask my son in Dental School), but I’m always looking to lower beta, mitigate risk and increase yearly income for these portfolios. I am a precious metal buyer as well but that is to get away from the fiat US Dollar 💵 and a conversation for a different forum. The first step I always look at is what if I was incapacitated or passed away today, what would my heirs do with the assets of my estate? What if there were challenges to my trusts (both domestic and overseas) and the assets could not be traded for a longer period of time? What would happen with my commercial real estate and tracts of tree farms? Because of my legal background, I URGE everyone reading these words to make a will, create an estate plan through a trust (if you have a decent asset base) and have a medical power of attorney; these will protect you and your family. Have extremely detailed instructions what is to be done at you time of passing or your unfortunate incapacitation. You will feel much better and help your heir immeasurably. In Latin we say, protegas culi mei amici
One more thought on estate planning – I am a big fan of trusts (as Azureblue suggests), but I also recommend that people figure out who will manage your assets when they are gone. A trust will transfer the assets, but then somebody has to manage them.
If you don’t have someone (like a spouse) who is as interested in stocks/bonds/real estate/international as you are, think about how those things will be handled without you.
Personally, my wife has no interest in managing investments, so I have a fiduciary investment advisor manage a healthy slice of my portfolio. That way I can see how he is managing, and I can look to him as a “anchor point” because he is more conservative than I am.
My wife knows him (and has for 20 years) and is comfortable with him. Our plan is for her to just turn over management of all the US accounts to him. For my off-shore assets, I have a different plan (a little complicated, but it should execute automatically).
That plan lets me sleep better at night. Wife sleeps well because she asked me if everything is set up and I said yes. Hope I am right…..
Those with hard earned assets definitely should have estate planning in place. The current high estate tax exemption expires in two years. We took advantage by forming SLAT(S) which allowed us to take the current estate exemption.
Also with trustees most corporate will not hold delisted or sometimes OTC securities. Further, if one is assigning a trustee that is past 50, best to have a successor trustee in place. While I like local trust offices, my expectation is that over the decades these may well be bought by larger entities. Therefore, I chose a larger entity that I hope will remain as is for decades to come.
Regardless of assets, one should have estate plan and be aware of future expected exemption amounts.
Azure, if you are recommending shit you don’t own and just spout it to make a buck, well, that’s one thing. But if you own something and really believe in it, well, that’s something entirely different.
My family has started coming to me for investment advice. They all made at least 10 times my earnings during our respective working lives. Yet, I am financially secure and they are not. They are now strapped to support the life styles they have become accustomed to and are faced with somewhat extreme cutbacks and loss of face among the friends they’ve struggled to keep up with. So. I just tell them what I am buying and what I would buy if I could buy only one thing.
What I tell them works very well for me, because I am invested in what I recommend. And I continue to Sleep (very) Well At Night.
JMO
azure
any thoughts on dmlp which is in the same general area. Would value your take. tia SC
Hi sc4, Dorchester Minerals, L.P. is a publicly traded limited partnership that commenced operations on January 31, 2003 upon the combination of Dorchester Hugoton, Ltd., Republic Royalty Company, L.P. and Spinnaker Royalty Company, L.P. My issue is that I do not follow them because they are taxed under a K1; I promised my accounting team that I would stop holding/buying ANYTHING with a K1 about 4 years ago and have sold off the vast majority of my holdings that throw off K1’s. I use to own an enormous amount of EPD, as I was very close friends with their founder and my mentor Dan Duncan. I still own a large position in (GHI) Greystone Housing Impact Investors LP because they throw off a tax free distribution and I just can’t sell it. I wish I could be more help 🙃
Ab,
Fidelity says founded in 1982. Like Grid, one of my favorite flippers for years.
They have been growing by acquiring other leasehold companies in exchange for shares in the trust.
I haven’t owned in a while since the share price went over 20 – 22 a share. Yes there is a K-1
I tried to only buy low and sell high. Not a long term hold as its dependent on prices of oil and gas. so I never wanted to be a long term holder riding it down.
Hi Charles, you may want to look on DMLP’s web site https://www.dmlp.net/ as they say 2003, but what’s 21 years between friends…
thanks Ab,
Was looking at silver bars today and wondering if it was getting time to replace the ones I had sold. Stocks are hard to beat with commission free trades.
Charles, you pose an excellent question; “why are the premiums so high on physical precious metal” verses equities. I have been buying a lot of proof junk silver and some just regular junk silver the last few weeks. I’m paying about $18 per $1 worth of face (14 dimes make an ounce) and the premium seems so high considering spot per $1 of junk is really $15.03 https://www.coinflation.com/silver_coin_values.html Many years ago, I use to be able to get junk at near spot from SD Bullion and 1 oz silver Eagles at $2.50ish over. I miss those days! Reddit has a site that is for buying and selling precious metals and I’ve met many people there that have become friends. We all have a text chain and alert each other when there is a deal somewhere or if one of us want to buy/sell we try and keep it within the group. Do you just buy silver or other metals as well? All the very best, Azure
Azure
Not a problem. I have a good accountant and let him deal with the K .
But I completely understand your point. I was never lucky enough to meet Dan D. but clearly he was an impressive guy.. Given your rules, then SJT is another operator which you do not follow.
Interestingly, I sold ATAX( I think that was the simbol) after the management company was sold. The firm just had a very strong 4q as you know and honestly, I’m tempted to buy back in. I had replaced it with Vcif and was extremely disappointed when they sold out to KKK.
If you have not checked it recently, you might look at FTAI . I own several of the preferred but am tempted to repurchase the common as I think their
engine maintenance program will be a winner. Several of the spinouts form Fortress have done quite well. While few hear will find it suitable, FBIOP is another high yielder which in small volumes could be interesting. Merely an observation. Thanks again your inputs. SC
sc4, you remind me of a story (if you will indulge me for a long moment). When I was a very young Money Manager, a random older guy comes into our Manhattan office, walks right past my assistant and says he was referred to me by someone I’ve never heard of. He’s dressed in a tennis 🎾 outfit and sits down in one of my chairs and opens his large briefcase on my desk to reveal a HUGE stack of stock certificates (years ago people kept their own stock certificates because the brokerage firms were going bankrupt all the time and it was hard to get your assets back). These stock certificates were all in the same company; Black Hills Power (now Corporation) and I start adding the amount of shares up as we are talking about tennis. I had actually never heard of Black Hills Power until then. I figured out that this gentleman owned a whopping 7+% of the company and asked him just how he acquired so much stock. He told me that he was a retired attorney (went right from high school to law school with no college) and that Black Hill Power came to Boston to speak looking for new investors and he met them at a charity event. He thought they were so easy going/professional and liked their business plan that every-time he settled a large case or he had more cash then he needed he bought BKH stock and was reinvesting the dividends all these years. While he was at my desk, I called the CEO of this utility (we were a mainly an institutional brokerage firm and had “everyone” in our directory); the CEO picked up his own office phone. I told the CEO just who I was sitting with and how much stock he had accumulated and he said, “we have always known someone had accumulated a large amount of stock, but never knew who it was”. These 2 people spoke for over an hour on my office phone speaker and Black Hill sent a plane for my now client to be honored at their annual meeting (which I then attended regularly). My family has a very similar history with ATAX (now Greystone Housing Impact Investors LP) and I just cannot sell this security, so it remains one of only a handful of K1’s my trusts still own. Thank you for letting me go down memory lane and I’m sorry I was so long winded. Be well my friend, Azure
Azure
No ,not a problem at all. This board is a safe place for intelligent conversation and we can all learn from these experiences. Clearly you have had a chance to meet a wide range of interesting personalities over time.
If I may though,have you ever looked at FTAI and if so do you have any take on it? ATAX was and probably is a terrific asset but it is not the same company today it was when control shifted. The business model does seem largely unchanged but not the people. It is the kind of company I like. I think FTAI , now has the kind of potential that atax has though in a different sector which is why I would value your take.
Thank you again for your thoughts SC
sc4, I am just somewhat familiar with FTAI and their equity/debt structure. I recall reading something last year about this aviation corporation having holdings in both Ukraine and Russia. I have a much better grasp of cargo/freight/container shipping companies. I owned a large storage facility in Ocala, Florida and have bought many newer and slightly used containers for rent and resale, I was then following this segment of the shipping industry and its trends. What do you think of FTAI and their prospects? Are you a buyer/holder of their debt, equity or preferreds?
Azure
I originally held the common of Ftai. At that point they had not split out the infer structure element from the aircraft and engine leasing part. Today they are split . I like the leasing business and especially their program to refurbish engines which they can now do for much lower cost that commercial shops as they have a JV to do the work and also are getting four key parts certified. Over the last year, I’ve sold the common and replaced it with two of their preferred i.e. FTAIN and FTAIO. They had a strong quarter and the engine side of things leads me to consider taking on the common again. Is this a good business and one to invest in? As you often say, each of us has different requirements. I think it is quite interesting and has been profitable but I would be interested in your take on it. If you like ATAX, then my guess was that you might find this of interest as well. The preferreds have done well but they are not equity. Value your thoughts. All the best SC
PS Azure
Re the assets of FTAI in the Ukraine and Russia. I believe that they have settled Ukrainian matter and the amount in Russia is not major and it is with their insurance firm at present. best sc
sc4, I highly suggest reading or listening to the last couple earnings conference calls https://finance.yahoo.com/news/q4-2022-ftai-aviation-ltd-051337519.html FTAI’s business is just above my pay grade, but I’d be glad next week to ask a couple of my Money Manager/Analyst friends and see if they follow the stock. The analyst from Raymond James that follows FTAI is Robert Dodd; very sharp and intelligent and I would look to see what he has to say. Hope you are having a great weekend ⭐️
Did this man accidentally violate the 5% ownership without filing a Schedule 13-D?
You are 100% correct; the story is much more complex but in the interest of time and boring people here, I ended the story as I could write much more about this individual investor (that had long passed) and his national fame as an attorney. Hope you are having a great weekend, A
azure
thanks the suggestions and I would value your talking with your friends. As is, I read the quarterly cc and pre covid has a chance to speak directly with the ceo who is an impressive guy..Once again, I do not know the rj analyst personally, but do read his reports. If you know the analyst personally, I think the reports have more meaning so your inputs on him are of value. Many thanks your very constructive suggestions. SC
I’ve had a hard time in the past trying to buy some of the Phillips LP/CO bonds in Ally because of the take over. There are a bunch available, but not all of them. The one you bought is significantly better than the ones I can find.
The closest in date is 3/15/28 718546AR5 w/ YTM on my calculation of 5.094%
Azure: To reply to you from this AM. This list is not properly formatted, but here are the first few I manually adjusted for this copy/paste.
Placed in correct space for Tim’s site: BONDS
PS: I opened a ticket with IB and am promised a reply. We’ll see. They can keylog every move I made, I know this, but the change in policy may be good for me (buy-hold), but creates dead (unchurned funds) for them on a trading site. All those popups should be able to let me sign off any liability on my OWN order placement. ??
Cusip Last trade Comments
89114x4c4 10-28-22 small issue, old transactions
718549af5 02-22-23 traded today D to C 500MM, 25% of float 655844AJ7 02-21-2 3 lots of trades 800MM, symbol not found
Joel, these bonds can be purchased at Vanguard, do you have an account there? Phillips is being offered at $83.896 to yield 7.676% and the Norfolk Southern 🤐 bond is $110.064 to yield 5.118%…
Ab on Phillips that’s better than fido but only 2 trades today dealer to dealer and customer buy. Yesterday 3 trades all customer. Then nothing before that until 2/8/23 so with fido you would need to log in daily and hope some are for sale and at your price you want to pay.
I feel Joel’s frustration as I have been having the same experience
Of interest for bond holders and buyers https://wolfstreet.com/2023/02/22/shopping-mall-cmbs-remain-distressed/
CUSIP?
The FFCB? 3133EPBT1 Callable 2/24
Intel just cracked the 6% YTM line with an IG bond:
S&P rating A
Moody’s rating A2
INTEL CORP 5.9% 02/10/2063 Callable w/ Make Whole Call
CUSIP 458140CK4
coupon 5.900%
maturity 02/10/2063
Price $98.14000
Minimum $2,000
YTM 6.023%
No way I’d buy Intel with CD @ ~5%. Go elsewhere. Numbers and rating are in downward spiral. IMHO. You can do Chart Industries and beat this. And others better than that!
I think I’ll need to disagree to a limited extent. Intel is definitely in a downward trend, but they have been here before and they have always survived. They have a solid balance sheet with plenty of assets to cover their debt. I have plenty of +4.9% CDs, but they will only last for 1 to 2 years and CD rates will then drop when the Fed Funds rate drops. Intel’s has a variety of 5.5% to 6% bonds with decent call protection that will last 20 to 40 years, and we are rapidly approaching the time to lock in long-term rates. Also, I make no buy and hold commitments – if (or when) the Feds begin lowering rates, bonds like Intel will climb, and there will be a nice capital gain to tack onto the yield. I have no doubt that I’ll make money on Intel’s bonds, it’s just a matter of how much. Last, I do my homework and frequently scan and sort the bonds available to me through Schwab, looking for yield, quality, duration, and some call protection. I frequently post what I have found, not as buy recommendations but to spur thought and comment by others, which is the point of this website in the hope that someone comes up with some long-term investment that is much better than what I am seeing. I’ll be happy to dump anything I find for something better – these are investments, not marriages. It wasn’t too long ago that posters were lamenting the lack of good bond buys, and now those buys are beginning to surface. So to anyone that doesn’t like what I post, try posting something that we can all benefit from rather than trolling the website as if this was a celebrity, movie, or political forum. Ideas matter – snide comments don’t.
Cali, I hope you are correct as I look daily, but long bonds arent anywhere near as good as they were in October. I got a noncallable 2033 and 2035 ute Empire District Electric (now called Liberty Utilities) senior unsecureds in 6.5% range last fall and they are now still 100 bps lower than when I bought back then. I should have bought more then.
Thanks. I’m obviously seeing the same thing, and I’m wishing I had bought more bonds back in October, but I was too focused on buying preferreds (although that was also a very good thing). I’m currently looking at longer bonds from Apple, Zions, Toronto Dominion, Goldman Sachs, B of A, and Royal Bank of Canada, but the prices are all slightly higher than they were 4 months ago, although they seem to be trending downward. I’m trying to do what you posted about a year ago – lock in long-term IG rated bonds above 6% and go play (after building a house of course). I could easily live on 6%. It was great advice – Thank you.
Cali, That was basically my reason too, so I guess I shouldnt complain why I didnt buy more at the time. That and well I only have a small money printing machine to begin, so choices had to be made, ha. I did buy some other bonds also in that 10 year duration such as the SJI 2031, DPL, ComEd, and PECO debt around that duration too.
goingtocali (fornia?), some of the Canadian bonds may be subject to “Bail-in Language.” I do not profess to understand it but know that language is included in the Prospectus of some Notes. Here is an excerpt:
“…. subject to conversion in whole or in part – by means of a transaction or series of transactions and in one or more steps – into common shares of the Bank or any of its affiliates under subsection 39.2(2.3) of the Canada Deposit Insurance Corporation Act”
Re: goingtocali (fornia), in my book, the song after is one of the best of all times: “When the Levee Breaks”
Thanks. Never planned to live in California, but our son moved here, and we thought we should be within a 4-hour drive of him. It’s pricey, water is scarce, and we’re fighting with a developer who believes that rules and laws don’t apply to him, but he gets to establish arbitrary post-purchase rules that we must follow. However, it is beautiful, spacious, and the people are generally kind and considerate. We live on the central coast where my wife can play pickle ball, hike, and canoe around Morrow Bay most days. Yearly daytime temps range between 50 and 80, and it’s sunny most of the time. We’re surrounded by farms, orchards, and large open areas with grazing cattle. Most of our produce comes from farms within 10 miles of us, and most of it was picked fresh and ripe within the last week. We hiked along the Montana De Oro bluffs for Valentine’s Day, and we maintain a watering trough for the abundant wildlife (coyotes, bobcats, deer, badgers, etc.) that visit our property. However, we would not have been able to afford to live here when we were younger, which seems to be true for many of our neighbors. I would never consider living in most of the cities.
goin2cali
Off topic nothing to do with bonds. The best guy I knew for auto repairs had a shop next door to my work. He shut down in 2020 due to the Covid scare. I kept waiting for him to open his shop back up, but the rumors were he was looking to move. I just happened to look on line yesterday and saw he had moved to Morro Bay. One of the few mechanic’s I know of who actually goes to classes to keep up with the current car diagnostic programs.
Maffei’s automotive. If you mention Charles the lead guy recommended him he will probably charge you more lol
Thanks – I’ll see if I can find his shop for future repairs. Morro Bay is a nice place. I rented a house for 1 year over-looking the bay, which gave me the chance to learn about the tide changes and how the moon, sun, and earth’s rotation affect the tides. The tide changes at Morro Bay are very noticeable for the California coast. Great opportunity for someone from a land-locked state.
going2cali,
I like your comment about being satisfied with 6% and IG risk.
For >6% yields to buy and forget I am also buying issues like WFC-L and BAC-L, which pay qualified divs, much better than bonds in a taxable account. They are probably lower graded than the bonds you mention (they are BB+ and BBB-, respectively) but hopefully, without Lehman events, will let me sleep.
Would you also like these (in a taxable account, but also even in a non-taxable one) to buy and go playing happy?
I’ve owned them in the past and did well with them, but I sold and forgot about them. thanks for the reminder – I’ll give them another look.
As BAC L is trading over par and past call date, is there a reason one should not be concerned? TIA
TNT,
Only if BAC approaches 130% of $50 for 20 days, which is >85% above todays price.
I would not be concerned while BAC is<$50, and then, yes, either u sell on time or at most, (least? ), get the $1000.
Experts: Do I see it correctly?
Pretty sure I remember exactly what you’re saying. It has to be trading 130% for 20 out of 30 days and then it’s still an option if they force you to convert. At that point you’d get 20 shares that are worth a minimum (at that time) of $65 which would be about $1300 in total value.
Interesting, when they’ve just announced cutting their dividend by 66% (https://www.morningstar.com/news/marketwatch/20230223390/intel-cuts-dividend-by-66-in-inevitable-move-that-was-once-unthinkable).
Just bought from Vanguard:
US Government Federal Home Loan Banks CUSIP 3130AUZ98 6% coupon @100 due 3/13/28 rated AAA/AA+ pays semi-annually settles 3/13/23. I believe this bond was good for my IRA, just the bad part is that this debt is callable every month from 4/13/23 at par so the duration is quite low.
He that lendeth to another in time of prosperity, shall never want help himself in the time of adversity.
Federal farm credit bureau now up to 6.25.
AB – You’re OK with this not settling until 3 weeks from now and then being subject to call 30 days thereafter??? Paying any premium above par for this seems to not be worth it unless you really believe in higher for longer.. Nov 7 I bot 3130ATV95 FEDERAL HOME LOAN BANKS BOND 6.00000% 11/23/2027 @ 6.00% Ca and it’s now CALLED FOR 2/23/23, the first available call date. Paying any price above par would seem like a bet not worth taking for what you can expect with the slightest downtick in rates based on this.. especially since you don’t start accruing for the next 3 weeks.
2WR, thank you for your thoughts. Yes, of course I would only pay par (and did) as the issue can be called in such a short period of time. While I am awaiting settlement date of 3/13/23, I’m earning 4.52% right now on my Vanguard Money Market until the firm takes the cash. I have laddered out bonds/term preferreds/CD’s etc in this IRA at Vanguard out about 11 years and have a very long time before Uncle Sam forces me to take any distribution. I have been extremely fortunate with the growth side of my retirement portfolio and have been increasing the percentage of laddered income securities for about the last 5 years. This has lowered the Beta greatly and I really don’t look very often at these income bond and revenue producers as I have no intent on selling them before call or maturity. BTW, can you image me telling anyone here I got 6% with a AAA rating government agency a year ago like this; people would have begged, borrowed and stolen to find cash to buy this security!
Hope that helps and I’m wishing you profitable investing my friend, Azure
Azure, Great buy of the FHLB Bond. I also have a handful of them. Sure some may be called from us but ultimately we’ll be left holding a batch of these high-quality trophies.
While avoiding the prediction business and tuning out the news cycle; noting the ten-year (interim spike’s notwithstanding) is trading higher than at the prior 3, 6, 9 and 12-month marks.
Selling nothing and continuing to make daily opportunistic buys (adds) of all groups, – perpetual, term-dated and FTF issues. Also averaged-down slightly a few rungs of the treasury-ladder.
Like you imagining what it would have been like to have these available a year ago. While not at peak pricing, still a dramatic improvement of unknown duration…so continuing to acquire and build with the safest and highest quality issues.
I would appreciate any info on insurance for muni bonds. I know Tex 2 at one point had said he only considers a few insurers as trustworthy, but I can’t find that comment. Any and all discussion would be appreciated.
No Call versus Make Whole Call-
With the assumption that rates may start to come down in 2024+, I am looking to purchase issues that are not callable – albeit at a slightly lower yield. The Make Whole Call issues seem to provide some protection (see below).
“The issuer typically has to make a lump-sum payment to the investor. The payment is derived from a formula based on the net present value (NPV) of previously scheduled coupon payments and the principal that the investor would have received.”
Question – Does the Make Whole Call provision provide as much protection as a No Call?
I realize that Make Whole Call provision vary from issue to issue. I suspect the main issue will be the lost opportunity cost.
Thanks in advance.
Proto123…This is not a mathematical formula type explanation, but just my personal experiences with make whole calls. 1. Had a bond that matured in one year and paid 7.5% interest. Make whole call at $1075. Actually gained on opportunity cost, because I could get the money working faster. 2. Had a long dated Sun America (AIG) called when interest rates were low. Coupon was 5.6% if I remember right. Basis was $1060, rates were a bit higher when purchased. Make whole call at $2460. At that time I went up in credit quality and bought 2 bonds with a 3.61% coupon and had $160 left over, so on the original basis-the $160 left over I had $450 in each bond for a yield of 8%. I was happy with the make whole calls. They are rare, but tender offers are fairly common when rates fall. You do not have to participate in the tender offer.
That’s an interesting question. Proto…. Obviously from any perspective any kind of call cannot afford as much protection as a no call, but from the point of view of the issuer, a make whole call comes pretty close because it’s particularly punitive…. That’s why you hardly ever see a make whole call exercised on a longer maturity bond… I know when make whole calls came into vogue, I think the rationale sold to the issuer was that it provided a possible out under unusual circumstances that they wouldn’t have if they were non-callable… But at the same time they were being marketed to bond buyers as a call provision so onerous that you could feel almost equally protected as if there was none…. I’ve always thought it’s a bit difficult for the bondholder to really understand just what protection they have when they have a make whole call, but it is possible to estimate, but only on the basis of as if the call happened on the day you calculated it because in actual numbers the call price is continuously changing depending on changing variables too. But it can be done, and by doing so, you realize just how much protection you receive especially the longer the maturity… If you want we can attempt to go into details, but it’s as boring as H double hockey sticks.
Thanks Lucky and 2WR for the comments. MWC issues do carry a slightly higher yield but have that “ambiguity”. Guess I will consider both but will avoid the strict “call” issues for my purpose.
I just looked at a bunch of bonds that were issued in 2022 with make whole call provisions.
You are right, the MWCP is not for the faint of heart.
https://www.sec.gov/Archives/edgar/data/1065088/000155278122000613/e22492_ebay-fwp.htm
“in each case at a redemption price (expressed as a percentage of principal amount and rounded to three decimal places) equal to the greater of (i) (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming the Notes of the applicable series matured on the applicable Par Call Date) on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 20 basis points, in the case of the 2025 Notes, 25 basis points, in the case of the 2027 Notes and 35 basis points, in the case of the 2032 Notes, less (b) interest accrued to the date of redemption, and (ii) 100% of the principal amount of the Notes of the applicable series to be redeemed, plus, in the case of both clauses (i) and (ii) above, accrued and unpaid interest thereon to the redemption date.”
for those interested. I did a quickie screen of bonds issued in 2021 and 2022 that I think have been filed on Edgar that meets the following criteria.
1. Has a make whole
2. has a rate>5.5 (these bonds tend to be either very low coupon or very low rated issuers, but this list shows some surprising quality issuers.
3. Maturity date 2040 and greater
This search comes back with about 30.
to find the prospectus put the CUSIP or the CUSIP with a space in position 7 in this link
e.g.
https://www.sec.gov/edgar/search/#/q=925650AE3&category=form-cat5
or (with a space
https://www.sec.gov/edgar/search/#/q=925650 AE3&category=form-cat5 (finds the prospectus)
| 260543DH3 | 6.90000 | 2053 | DOW CHEMICAL CO |
| 68389XCK9 | 6.90000 | 2052 | ORACLE CORP |
| 92556HAE7 | 6.37500 | 2062 | PARAMOUNT GLOBAL |
| 842434CX8 | 6.35000 | 2052 | SOUTHERN CALIF GAS CO |
| 87612KAC6 | 6.25000 | 2052 | TARGA RES CORP CALIF |
| 571748BS0 | 6.25000 | 2052 | MARSH & MCLENNAN COS INC |
| 25278XAW9 | 6.25000 | 2053 | DIAMONDBACK ENERGY INC |
| 209111GD9 | 6.15000 | 2052 | CONSOLIDATED EDISON CO N |
| 036752AX1 | 6.10000 | 2052 | ELEVANCE HEALTH INC |
| 91324PET5 | 6.05000 | 2063 | UNITEDHEALTH GROUP INC |
| 744320BK7 | 6.00000 | 2052 | PRUDENTIAL FINL INC |
| 747525BT9 | 6.00000 | 2053 | QUALCOMM INC |
| 37940XAR3 | 5.95000 | 2052 | GLOBAL PMTS INC |
| 26444HAN1 | 5.95000 | 2052 | DUKE ENERGY FLA LLC |
| 641423CF3 | 5.90000 | 2053 | NEVADA POWER CO |
| 02361DAZ3 | 5.90000 | 2052 | AMEREN ILL CO |
| 539830BY4 | 5.90000 | 2063 | LOCKHEED MARTIN CORP |
| 279158AQ2 | 5.87500 | 2051 | ECOPETROL S A |
| 91324PES7 | 5.87500 | 2053 | UNITEDHEALTH GROUP INC |
| 548661EN3 | 5.80000 | 2062 | LOWES COS INC |
| 87264ACX1 | 5.80000 | 2062 | T MOBILE USA INC |
| 049560AY1 | 5.75000 | 2052 | ATMOS ENERGY CORP |
| 539830BX6 | 5.70000 | 2054 | LOCKHEED MARTIN CORP |
| 012653AF8 | 5.65000 | 2052 | ALBEMARLE CORP |
| 05526DBV6 | 5.65000 | 2052 | BAT CAPITAL CORP |
| 87264ACW3 | 5.65000 | 2053 | T MOBILE USA INC |
| 31620MBZ8 | 5.62500 | 2052 | FIDELITY NATL INFORMATION |
| 548661EM5 | 5.62500 | 2053 | LOWES COS INC |
| 925650AE3 | 5.62500 | 2052 | VICI PROPERTIES LP |
You have to be careful buying above par even with make whole you could still lose money.
That Dow bond sells at 113.9 and is callable with 15 days notice.
AtlBob….Yes, at $113.9 you are buying above par, but with the MHC feature, the ask yield to worst is 5.897%, so you would make money if called. With a par call, the ask yield to worst would be negative, and you would lose the premium you paid.
Not quite, lucky – the figured YTC @ 5.897 is figured to another call outstanding, a par call in place for only 6 months prior to maturity.. So if you’re called out on the basis of the OTHER call, you end up getting 5.897% vs 5.903% YTM. You’re not losing yield worse than a rounding error if it’s called because of that call..
2WR….O.K., then if 5.897 is the yield to worst, does that mean that a MHC would give a yield> 5.897? A link to the prospectus would give the discount rate applied to the remaining unpaid coupons, and it could be calculated, but I couldn’t find it on Edgar. Worst is still worst though, right?
That’s where the weirdness comes in because given the make whole call is in constant flux, any bond with only a make whole and no other call seems to always be considered as YTM being YTW But here’s what I wonder….. If interest rates were to go to 8 % next year for the 30 year UST (which for simplification purpose we’ll say remains the comparable Treas) then theoretically, I think a bond like this Dow 6.90% coupon becomes callable at par under the make whole provision at the time, wouldn’t it???? That’s theory talk but I don’t know how it would actually work in the real world, especially when refinancing costs for the company under those circumstances would also have gone sky high. As I mentioned, always lots of moving parts when it comes to a make whole provision
2WR…..In the scenario you mention it seems that the Dow bond would be callable at par, and had you paid a premium for it, calls into question the accuracy of the assumption that, with a MHC the YTM is the YTW. As we have discussed previously, the reinvestment of the par call proceeds into a now discounted bond with a similar coupon yield as the called bond and a MHC or no call provision would give a higher YTM than the original bond had it not been called, but that would involve a separate, additional transaction(s) and would not change the inaccuracy of YTW calculation that was presented at the time of purchase of the original bond. Whether or not the extra YTM received from the additional transaction would exceed the original premium paid for the Dow bond is also a moving target, as you suggest. In AtlBob’s scenario, where the bond is trading at a premium and is called at that time, I feel you would likely make money with the MHC. Kind of complicated, but it seems under most scenarios that the lender has the potential to come out better when a MHC is exercised than when it is not or when compared to a non-callable bond with similar yield and maturity. This brings the discussion back to Proto123’s original question. Whew. Time to count sheep instead of coupons for me.
What’s also interestingly theoretically about make whole calls in a way is how this past year’s meteoric rise in interest rates can possibly wreak havoc on the protection afforded a make whole call bond. It is theoretically possible for a company to have issued bonds at very low rates and now the calculation base to figure a call price is actually higher than the coupon of the issue. In that case I believe the call would be at par….. For example, IStar, upon merger with SAFE will have to call its outstanding debt with make whole provisions, including CUSIP 45031UCG4 4.25% due 8/1/25. Going by memory, the provision is to be based on the going rate for comparable Treas (let’s use 2 year exact for example and 4.60% for simplification) + 50 basis… That would mean you’d discount @ 5.10% to exercise the make whole and that would end up being a price below par. Fortunately, make wholes are stopped out at par, so I think these will end up being called only at par… I’ve not seen this happen in practice, though, but I’m pretty sure that this would be an example of where the make whole protection actually goes away. BTW, I feel like I’m attempting to come off as an authority on this… Please do not consider that to be true…. I’ve just put some thought into trying to figure out the math and the pros and cons.. It’s easy for me to think I may have overlooked something
Couple questions 2WR,
Except for the first two on this list that are pushing almost 7% does it make sense that companies are going to call bonds in the 5-1/2 to 6% range in the next 10 to 20 years ? Until Greenspan came along with ultra low rates I think these yields were normal 30 to 50 years ago.
Second question ( and I do consider you an expert even if your long time retired ) Say I buy a bond that pays it’s semi annual payment in one month it has 5 months accrued, do I have to pay the former holder that accrued interest or do I get it just like I would buying a preferred stock?
The reason I ask, is I used the Fidelity bond calculator you showed me and I saw it showed the accrued interest and I was looking at a bond that I would have to pay over par to buy but the accrued interest would offset that by about 50% if I am entitled to collecting it.
CharlesM….You pay for any accrued interest at the time of purchase.
Charles – Lucky’s got it right…. With bonds as opposed to baby bonds, you pay out the interest that is owed to the former owner of the bond you buy…. always the case.
As far as Question #1, I’d say the answer you’re looking for would come from knowing where interest rates will be over the next 10 to 20 years moreso than having anything to do with the call feature itself… I’m not sure if you’re referring to the make whole call specifically or not but to generalize, the lower the comparable US Treas yield is relative to the coupon of the issue, the more onerous the make whole call is..
Here’s simple way to estimate what the dollar price of a make whole call would be on any bond at any time: Let’s assume (incorrectly) that all make wholes are calculated at comparable Treas + 50 basis… You have to know the yield of the Treas that has the closest maturity to your bond… So let’s talk about a 30 year 6% bond being called by a make whole provision today… We’ll say the 30 year is 3.90% today…… So take your handy dandy Fidelity calculator and figure the PRICE of your 6% 30 year maturity bond with no other call provision priced to yield 3.90 + .50 or 4.40%. THAT DOLLAR PRICE will give you the approximate price at which your bond would be called under a make whole call TODAY…. NOTE: everything’s constantly changing so by the time it’s actually call your numbers will differ, but that should give you a starting point to estimate what you’d get on the make whole call…… I know you’re a west coaster so you’re not really close to bedtime yet, but for the rest of us in Eastern time, I hope I’ve helped you avoid having to take a sleeping pill tonight.
Thanks 2WR and Lucky. I have seen the notation on the FINRA website as to if a bond is callable or not. Some say yes and some have nothing noted. But still on quite a few I have looked down to see what the original amount that was issued and I see it is still outstanding. Which leads me to believe a lot of companies are just like the rest of us humans and wait to the last minute to pay off their debt.
Unlike Justin who wants to hold to maturity 30 years out, I would be happy to hold at the most for the next 20 yrs. So far what I have found that interest me is out about 10 yrs.
Theta has been throwing out a lot of interesting suggestions and I decided to just Google the companies with the question of bk or financial destress. On one of his suggestions, I was surprised how bad Goodyear was doing. The return on the bonds just didn’t seem worth the risk.
I DID look for bonds that you could hold for 20 years.. (2040 and greater)…
there just wasn’t any with a coupon above 5.5%.
It was more a maximize the yield list by taking a combination of the most remaining interest payments and the highest yield.
cusip 403949AC4 one example I have found digging in the energy sector between 2 to 10 years out.
DOW has 31 pages on FINRA lot of debt to cruise through before bed last night. They have managed their debt pretty well and almost all low coupon.
One thing I noticed interesting though is the amount of debt they have maturing 2052 although that could be from just looking for yield 5-1/2% and higher.
Justin..I did similar bond searches last year with the same results, very few higher coupon bonds available with maturities past 2040. Various III’ers talked about higher coupon bonds they had recently bought with maturities in the 2030’s. Upon modifying my search by changing maturity dates, I noticed that after 2038, the number of higher coupon bonds dropped off substantially. After thinking about it, I came to the conclusion that this drop off point corresponded to 30 year paper issued before vs. issued after the implementation of QE, which brought long rates down.
2whiteroses….Although, if interest rates rise, the NPV of the bond’s remaining coupons could be negative and the bond would be called at par, I believe the lender (us) would still benefit. Here is my thought: The bond is called at par. You buy a bond with the same coupon and maturity, which is now a low coupon bond in the present rate environment. You can therefore buy it at a discount and receive the same coupon as you would have if the original bond had not been called. Take the difference between the par valued received and the discounted bond bought and put it in a risk free with the same maturity. The coupon on the risk free is your premium received for the call. Am I missing something?
Nope, don’t think you’re missing anything….Coming from a different angle, if interest rates rise to the point where comparable Treasuries are now trading at a coupon rate higher than that of the bond you own, most likely, your bond will be worth a discount to par at that time or much less than what you paid….So getting called at par in that environment would still be a happier ending for you than were they not called…. The point I was trying to make was that the extraordinary premium price you might have dreamed about possibly protecting you when you originally bot your make whole call embedded bond will not materialize in these circumstances. But still most likely, you will not experience the reinvestment rate risk with a bond being called from a make whole call provision, even under these circumstances, that you would on a normal optional call when a company usually calls when it’s least advantageous to you.
2whiteroses….Yes, mostly agree, but under these circumstances (rates having risen), you would not face reinvestment rate risk. If, however, rates had fallen a lot, thereby presenting reinvestment rate risk and putting the holder of a normal optional call in the least advantageous position, (opposite circumstances) and a MHC was exercised on a bond that was similar to the one with a par call, that’s where the extraordinary premium price to help protect you comes into play. Lenders (us) come out better either way. But yes, if you thought you would get a big premium to par regardless, that is wrong
This discussion has helped me to understand the concept and mechanics of a MHC. Hope I didn’t come off as a know it all, because there is plenty that I don’t know, but thanks to the input from contributors to this site, I am learning more all the time. Thanks everyone!
Yegads, lucky – we share the same fear….Hope I didn’t come off as a know it all, because there is plenty that I don’t know. ha
You are both miles ahead of me and I greatly appreciate the resulting dialog. It’s always an education! Thank you.
“Question – Does the Make Whole Call provision provide as much protection as a No Call?”
Yes, if you reinvest the proceeds from a MWC in Treasuries, you will end up with the same future value as a No Call (actually, slightly more).