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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12/21/2024
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I’m looking for a post that I think I read on this bond forum, on the SIRINT Corp 4.6 Nov01’26 bond. I can’t find it with the search function. It may have been a post by Azure….but I’m not sure.
Any opinions on this bond?
Sirint?
A CUSIP/ISIN would be helpful.
Is this what you’re referring to:
https://markets.businessinsider.com/bonds/4_600-siriuspoint-bond-2026-usg8201faa78
IBCID
253729602
ISIN
USG8201FAA78
Yes that’s the one…don’t know how to find the CUSIP
closed at 86.47 according to IBKR.
Thanks
CUSIP is 3rd to 11th positions of the ISIN.
for USG8201FAA78 it would be G8201FAA7
Thanks Justin
For anyone looking for rated long bonds:
Spire Inc. 4.7% 08/15/2044 Callable
CUSIP 505597AD6
BBB+/Baa2 rated
Callable in whole or part Daily beginning 02/15/2044 with 30 days notice.
Make whole call Daily beginning 08/19/2014 with 30 days notice (but, unlikely to call 4.7% bond).
Schwab’s YTM 7.048%
Price $74.468/bond. Two years ago, this was trading above $120/bond.
This has been popping up today in small quantities ($10,000), but they are bought quickly (yes, I bought some). If you like rated long-bonds, this isn’t too bad, but you will need to actively watch for it.
Hi Folks,
Note sure if this is the correct place to post this, but I encountered this interview form a portfolio manager at Eagle Point the other day. I found it to be insightful and thought I would share.
https://insuranceaum.com/an-intro-to-the-inefficient-world-of-portfolio-debt-securities-with-dan-spinner-of-eagle-point/
Full disclosure – I own a 2.5% (1/2 for me) position in the Eagle Point and Oxford Lane CLO equity fund term preferred. I do expect to scale these up after the Oct/Nov rate hike.
August – great interview on a topic not covered much. They started a business after buying this sector for their personal accounts.
Buying debt/pref from investment management companies continues to be one of the best kept secrets out there.
In terms of super safe investments with a spread of ~200 bps over treasuries, I will take a pref issuued by a solid CEF all day long vs many alternatives such as pref utes.
Math time. I’m trying to reconcile my preferred stock math with bond math. Example problem:
$25 term preferred stock (or baby bond) with 6% yield and maturity in 5 years, so collect $1.50 in divs for 5 years = $7.50 in divs. If you purchased at $22.50 per share, then you would also gain $2.50 in capital for a total gain of $10.00 ($7.50 + $2.50) in 5 years. Average annual gain = $10.00/5 years = $2.00/year. Average annual return based on purchase price = $2.00/$22.50 = 8.89%. Pretty standard calc.
Now, if I want to compare average annual return to a bond to determine which to buy, I would use the exact same math. Using the following bond:
B.A.T Capital Corp 4.54% 08/15/2047 Callable
Matures in 24.0 years
CUSIP 05526DBF1
Price on 8/16/2023 = $70.14/bond
Divs = 4.54% per $100/bond (initial par value) = $4.54/year for 24.0 years = $108.96/bond in 24.0 years.
Capital gain = $100 – $70.14 = $29.86/bond in 24.0 years.
Total gain = $108.96 + $29.86 = $138.82/bond in 24 years.
Average annual gain = $138.82 / (24.0 years) = $5.78/year.
Average annual return based on purchase price = $5.78 / ($70.14) = 8.24%.
Here is the problem: Schwab’s bond page lists the YTM for this bond as 7.165%, not 8.24%. Three of Schwab’s people agree that the total gain in 24.0 years would be $138.82 (see calcs above), and their bond calculators also tell them the YTM is 7.165%. But, they can’t answer this question: If the YTM is 7.165% on a 24.0 year bond that costs $70.14, then the total gain would be 7.165% x $70.14/bond x 24.0 years = $120.61, which is less than $138.82. Why are these different? My math matches Schwabs for bonds near par ($100), but the differences increase as the bond price drops.
I have always assumed that average annual return and YTM are the same, and that they both include all the dividends and capital gains based on the purchase price, not on par value. Are these these terms different?
Thanks for any responses because I need an apple-to-apple comparison for preferred stocks and bonds, and I don’t want to keep referring to a bond calculator when I can use a spreadsheet.
I learned about this one recently, and the way it was explained to me was that the ytm is a complex calculation that takes into account the time you actually have each payment in hand. So the return the first year is different from the last, since you’ve had those first payments in your possession longer. I use the ytm as a way of comparing different securities to each other, rather than a way of predicting how much income I’ll have (average annual return). Is this what you’re asking?
Irish – Thank you. I am using this to make an apples-to-apples comparison of preferred stocks, term preferreds (baby bonds), and corporate bonds since most of these pay quarterly or semi-annually. For example, I would compare HWCPZ (6.25%, coupon, YTM of 6.7%, 33 year maturity, and BBB- rating) to a BBB- corporate bond with a similar maturity and rating. If I can get a higher rated bond and a comparable yield, then obviously the bond will win.
Previously, I was just sorting Schwab’s corporate bond sheets to help make this decision, and then I started to do the math and realized that their bond math to calculate YTM is not the same as my YTM simplified calcs, so I can’t do a direct comparison.
It would seem that my only solution is to create a spreadsheet with potential corporate bonds, and then use the same calcs that I use for preferred stocks, etc. Otherwise, I’m under-estimating returns on bonds when I need to be loading up on IG long bonds with low coupons and beaten-down prices that will likely never be called.
BTW – I liked the price drops in 10 to 30 year BBB+ bonds lately. I’m looking at you Brighthouse, Lincoln Nat’l, Spire, B.A.T Capital, etc. with your BBB+ ratings, >6.5% YTMs, <5% coupons, 20+ year maturities, and <$75 prices. Gotta do something with that RCA money.
The basic problem in mathematically calculating yield to maturity is that reinvestment rates have to be assumed and assumed to be constant over the entire period of time….. YTM calculation also takes into account the time value of money. So in your bond calculation of average annual return based on purchase price, you are assuming that you’re getting a portion of that 29.86 discount every year, where the bond math I believe assumes you get it only at maturity… That makes a difference in the calculation of ytm v average annual return… Also of note, ytm also assumes a bond is held to maturity.
If you’re into math formulas (I’m not) and want to delve deeper, try https://www.investopedia.com/terms/y/yieldtomaturity.asp. Their explanation, even without the math formulas, may help explain why the 2 are not the same.. Oh and BTW, on your $25 bond example to note, YTM would end up being 8.478% v your average annual return calculation getting you 8.89%. so there’s a consistent difference.
There are other nuances that come to mind, but too boring to add to the mix imho
2WR – Excellent points. Thank you, and thanks for the link. It seems that I need to better define my plans for some of these comparative investments (such as will I really hold to maturity, or will I sell if rates drop and I get strong capital gains?). I do like math, but there are times when it is necessary to zero out some of the variables.
Cali
I’m a fan of the XIRR function in excel and have been using it for the calculations before purchasing baby bonds.
Once you set-up a format you like, it’s not too painful and generates actionable information for the purchase decisions. I’m finding it particularly helpful in looking at purchasing a new issue or an existing issue from the same firm.
I’m an old bond dinosaur who’s never learned to use excel for anything.. Alpha, who’s the IRR cheerleader and I, the bond calculator cheerleader, have privately gone round and round on IRR v YTM figured on a bond calculator and ultimately what we discovered is that if you verify that identical information is used in XIRR and https://digital.fidelity.com/prgw/digital/priceyieldcalc/ as an example of a good ytm bond calculator, you come up with identical results. So as Investopedia pointed out, “Yield to maturity is considered a long-term bond yield but is expressed as an annual rate. In other words, it is the internal rate of return (IRR) of an investment in a bond if the investor holds the bond until maturity, with all payments made as scheduled and reinvested at the same rate.” So rest assured, you can pick your poison to use either method.
Nicely said 2wr!
While not perfect, I use the Yield function in Excel. It is certainly good enough for comparison between investment options. Generally, I trust anything that I calculate myself in Xl more than anything that I see on a website of any kind.
– BAT Corp (BTI) , BBB+ , 6.43%Coup, 8-30 call and mat, 6.3%YTW bot at par today. 054989AA6.
– Clev Cliffs (CLF), Unrated, 7% coup, 3-27 Mat, callable, below 97, 185899am3.
Apparently, I am getting a personal Zoom call this Wed morn with someone at FINRA to go over Fixed Income site. I hope they eventually offer a much larger “class” for the public, or at least a better real world video. Maybe it is a research call to see if that is really needed? Maybe this guy is just a dingbat? I’ll let ya know.
Your personal Zoom call sounds as though it could be important for all III’rs. Thanks for your efforts and willingness to keep us posted…. Maybe after your input, I can stop ignoring the FINRA site as I have ever since this debacle..
Thanks again Joel, I had lost interest in the FINRA site. Felt like a bunch of young software engineers who had never used the old site designed something new tech. Why fix something that isn’t broke you can ask them.
Anything Joel?
Fidelity is showing offers on 2 different FMC bonds today
Joel, How did it go with the meeting?
TIM, I’m trying to get FINRA to post here regarding a ZOOM meeting next week to go thru the Fixed Income portion of the FINRA Site.
I think that the feedback we may have sent has been good and that we can all learn something valuable!!
Contact me by personal email if you want to. I’m in a conversation with them.
I gave the rep your info here, so don’t be surprised if you see a posting.
Thanks for all the hard work Joel
Here is a reply I got from FINRA re: Bond Symbols:
“You are confusing Equity symbols with Fixed Income Symbols. Given the fact that now we only support Fixed Income on the site – we do no have a notion of searching for equity symbols. With that said there are many simple ways to search for a specific Issuer/Company name. We understand that there may be a learning curve with this.”
Does anyone have a good site that I can bookmark regarding a starting point ?
Thanks, JA
dont know how to initiate a new post…so this is off topic
I purchased a new issue BNP Paribas 6% note on 3/23/23..maturing 3/26…..on Fidelity ….it was listed as paying Quarterly…It did not pay the first quarters interest!!….I am stunned…the largest bank in France did not pay interest on its debt and have not heard a word in the press.
What is the CUSIP?
if it pays quarterly, it won’t be paying for 2 more weeks.
Reply to myself??
– The best results on the FINRA tool are found by going to:
Sign in, Browse Bonds, check box, View Data, click Columns on lower right, UNCHECK all items EXCEPT Issuer Name and Accept, Enter ONLY Issuer Name in Fields for Quick Search, Click Show Results.
– You may have to reset and work the tool with various names for the company, but not the equity symbol in most cases.
This gets you close to the general overview of many of the bonds available for a given Issuer. At least this is the best I can do with the mess over there. Good luck and please post any thing you may learn.
Please use the Feedback link on their page to point out your obstacles. I have been dropped like a whining child asking for some porridge.
Signed, Oliver
Joel, I tried to find a bond that Grid had mentioned, it was either a Con ed or Detroit one and no luck. Being a subsidiary of another ute that meant I had to have the first 3 letters of that company’s name. Wasn’t worth searching the Internet when it used to be easier
I hope any FINRA users are still sending feedback. Looks like the kids, who have never functioned or invested in the Bond Markets, have created a sorting tool which is not useful IF you really have a brain.
Please send feedback! This is cumbersome toy and not the way investor’s function. I stayed away since Their Debacle and am now in Steamboat trying to do some re-investment work and am truly disappointed at the mess.
Need access to real information and can collate with the brain that I have, just need access to a big view.
Seems the door continues to close on the ordinary and competent man.
Even the link that Vanguard provides to FINRA for information on specific bonds in not working.
It seems like they broke everything, and have no idea how people and other businesses use their site.
I picked up a handful of-
Gilead Sciences
CUSIP 375558BW2
Coupon 0.750%
Price $99.00
Maturity Date 9/29/2023
A3/BBB+
Looks like a good place to park a few dollars.
Created a watch list on the redesigned FINRA web site and then could not get to the web site. You need to go to the following link to create an account and THEN to get to your account information.
Please select the FINRA Gateway login in the first paragraph on this page, https://finra-markets.morningstar.com/MarketData/Default.jsp?sdkVersion=2.62.7 . Then select the option for Create Individual Account. You will then be brought to a page to enter in basic information.
Has anyone ever heard of the Local Initiatives Support Corp? I see CUSIP 53961LBB4 5.60% due 7/15/25 being offered at Fidelity @ par. NR/AA- rated. Non callable, quarterly pay…. Authorized issue size is $200mil. I’ll probably pass. Settlement date doesn’t seem to be until 7/10.
A quick look at LISC website and I’m not sure where they will get the money to pay the bond at maturity. No time to figure it out. They do have an admirable mission statement.
Recently issued agency bond (just came out at Schwab):
FFCB 6.375% 06/21/2038 Callable
3133EPNE1
Recently Issued
09/21/2023 @ 100.00000
Just last week they called their 6.64% and 6.54% bonds. They still have a 6.45% bond outstanding. This new bond might make it a couple of quarters before it is called, and perhaps slightly longer if the Feds raise rates to 5.5% to 5.75%. I’m buying some today and tomorrow.
FFCB just called their 6.54%34 (CUSIP 3133EPCP8) and their 6.64%38 (CUSIP 3133EPCQ6) agency bonds. They also just issued a 6.33% 06/07/2038 Callable bond (CUSIP 3133EPMD4,Continuously-Callable on 09/07/2023 @ $100.00). There is a 0.21% spread between callable bonds and recently issued bonds.
Thanks for the info.
Where can we find this kind of info? I had 3133EPCQ6, just got a redemption notification from broker.
Max
Max – I received an email from Schwab on June 3. This was also posted on Reader Initiated Alerts by CTM on June 2.
I use the FFCB website and monitor the “Call Factor” entry for each of their bonds that I own. I do this as they approach first call date and then once or twice a week after they become callable. Relying on your broker is hit-or-miss.
https://www.farmcreditfunding.com/ffcb_live/debtSecurities/overview.html
Click on “Find by CUSIP”.
I haven’t tried this, because I don’t know much data comes down, but put this site into versionista.com and see what it comes back with daily.
https://www.farmcreditfunding.com/ffcb_live/dataCenter/termDebtActivity.html
(Versionista is free for 5 websites or less)
There’s a new FFCB (3133EPMG7) for 5.69 with a 2 year call date (6/2025). Interesting play if you think falling interest rates are coming.
Irish, Regarding FFCB 3133EPMG7, coupon 5.69%:
Maturity date is correct as 06/16/2038.
Yes, it is a longer maturity. I’m just seeing my higher FFCB get called away at first call, and with people looking for 2 year noncallable CDs, this might be a nice highly rated 2+ year noncallable play.
Hi Irish, Yes, the longer maturity leaves that darn 13-year aysmmetric yield-risk. Rates go higher, we’re stuck, lower – good chance they toss us from the truck.
Did buy a callable 13-month JPM at 5.45% this week, which in this environment am not expecting a call. But yes, 5.69% for a two-year would be a welcome find.
We still have hope via the much-chatted-about upcoming Treasaury issuances. We shall see!
Irish – Thanks. I scan the agency bonds daily for 6+% yielders, but they are all callable. Therefore, I did not notice this 2-year call dated bond. In the event that interest rates are still going higher due to Feds or massive treasury auction, I might hold off on buying for a month or 2 to see if the price drops.
Anyone had any luck on FINRA site? Seems I can log in but that’s it. The primary research tool gone. I hope those interested are sending FEEDBACK over at their site.
You set up a login protocol and then try to move on:
https://www.finra.org/finra-data/fixed-income
“Thank you for your e-mail and feedback to FINRA.
We are aware of this issue – the system will currently only accept the exact match for the Issuer (match to how it’s listed in our database). We are working on a correction and expect a resolution shortly.
Apologies for any inconvenience.
Regards,
FINRA”
Pretty ridiculous IMO. Hard to think they had much beta testing before releasing it to the public, because surely any user from the Morningstar would have commented on the numerous issues. I have been beta testing a major new platform for an oft mentioned brokerage. It is not rocket science . .
Tex – You have any path to follow @ Fidelity to get them to fix the input problems they’ve created on their bond yield calculator @ https://digital.fidelity.com/prgw/digital/priceyieldcalc/? It’s such a great tool but it’s becoming extraordinarily difficult to accurately input numbers and dates and the problems vary depending on which browser you use (assuming Windows – don’t know about IOS or Android). I’ve been told to talk to the Fixed Income Dept but it’s like pulling teeth to find someone who knows who’s in charge of programming the calculator…. I’ve been working on them but maybe you know some shortcuts?
Unfortunately 2WR, I am not able to help at Fido. Behind the scenes the calculator uses javascript to call the functions. You would hope that it would run the same on all modern browsers, but I guess not. It sounds like an IT problem instead of a fixed income group problem. There is an industry standard subroutine used to do all of these YTC/YTM calcs. The browser, regardless of which one is used, just has to get the correct input data passed to the subroutine. Sounds simple, but every browser is a little different.
I appreciate your response, Tex. I’ll give that angle a try….. I’ve researched and found a guy named Eric Grounds to be in charge of IT. Maybe he can help direct me to the right person.
Yup. Brain. Dead.
2wr, Just like Obama…you give me Hope.
Maybe this site can be a Public Beta Tester Feedback Site for Finra? What ya say Tim?…for a large flat fee!
The power of many eyeballs (and common sense which is very evident here helps).
Joel, to respond might be to cross the political line in the sand…. Let’s just say you made me shudder………..
Wow, did they hire 3rd graders to code it?
Either “LIKE” or “LEFT” description searches should have been part of the criteria…
Joel I am not going to bang my head against the wall. I copied and pasted a CUISP someone mentioned on this site and it found that single listing on FINRA but trying to do a general search for all bonds by a single issuer forgetta boug it.
I had a thought that if we filed a complaint with our brokers who are members of FINRA that they would get more of a response.
Joel, its kind of a joke for the new bond search tool
This web page at FINRA shows all the executives and leaders of governance there. https://www.finra.org/about/governance/executives
Steven Randich is in charge of technology there.
In my job I research the net to learn what I can about companies and people I may do business with.
If anyone is interested, I can search the internet for a contact e-mail
Linkedin, twitter, facebook, former places of business, D&B, etc to see if I can find a e-mail.
As a matter of fact he does have a Linkedin account and it shows other finra members
Wait until you experience the debacle over at FINRA!!
? OMG Joel I just tried to find the bond search page. I can’t find the search tool.
The new Finra bond registration process is awful. I think the new site was designed by Rube Goldberg.
You are required to create a profile here https://ews.finra.org/auth/registration-type?AppName=FINRA_GATEWAY&Forward_URL=https://gateway.finra.org/app?rcpRedirNum=1
I successfully registered , but I keep receiving this error message when I log in – “You are now successfully logged in. However, your destination application URL is unknown. If you know the destination application URL you may now proceed to accessing it directly.”
Same thing here, EB
FINRA is JUST an information site. It is supposed to be a Playing Field Leveller with access to info and facts of the past ONLY. It is NOT a Fiduciary of Custodian.
All this security crap is WAAY overkill for some subcontractor and legal fee generation. Got me a Govt Contract Mikey!!
I’d be okay with a log on and already had one with the disclaimer of Hold Harmless…check here and move on.
Asked for a reversion to the “Beta-View.” We will see.
I referred FINRA Feedback to come to THIS site and location to see real feedback from experienced investors.
Here’s the link, Charles: https://www.finra.org/finra-data/fixed-income/corp-and-agency/trade
blkrahn, already found it. TMI
Doesn’t work like the old search tool. I typed in DPL nothing, I typed in AES
nothing.
The old search engine would bring up a list of all the bonds for Detroit power and light or since all the bonds are under the parent company all the numbers start with AES
Yes Joel, I already gave them feedback with a link to this website also
I agree with you Charles. However, using the CUSIP field, I’m able to obtain recent trade information, last trade yield, etc. It definitely isn’t as good as before, but perhaps in time, it will become so.
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.