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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12/1/2023
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I was poking around to find names I like which haven’t rallied too much.
The newly issued Citigroup instl pref can be had on IBKR now for 100.25. Not bad…
7.625% Fixed Rate Reset Noncumulative Preferred Stock, Series AA
Citigroup will pay cash dividends on the Preferred Stock, only when, as, and if declared by the board of directors of Citigroup, or a duly authorized committee of the board, out of funds legally available to pay dividends, on the 15th of each February, May, August and November (each, a “dividend payment date”) (i) from, and including, the date of issuance of the Preferred Stock to, but excluding, November 15, 2028, at an annual rate of 7.625% on the liquidation preference amount of $25,000 per share of Preferred Stock (equivalent to $76.25 per depositary share per year), quarterly in arrears, beginning on February 15, 2024, and (ii) from, and including, November 15, 2028, for each reset period, at an annual rate equal to the five-year treasury rate as of the most recent reset dividend determination date (as described in “Description of the Preferred Stock — Dividends” below) plus 3.211% on the liquidation preference amount of $25,000 per share of Preferred Stock, quarterly in arrears, beginning on February 15, 2029. Payment of dividends on the Preferred Stock is subject to certain legal, regulatory and other restrictions as described elsewhere in this prospectus supplement. Dividends on the Preferred Stock will not be cumulative.
https://www.citigroup.com/rcs/citigpa/storage/public/CitiSept092123PreferredStockSeriesAA.pdf
Maine—-I bought this issue at $100.035 ($1,000.35) and I’m thinking about buying some more. The problem is the institutional dealer spread can be wide. I have to call the Schwab bond desk and ask them to get some quotes. It’s sort of a hit or miss situation and you can only do it about once or twice a week. At least, that’s my experience.
Yeah, the process for buying with Schwab and fidelity is frustrating. With interactive brokers, no call is required. They are plugged into the electronic bond trading platforms and simply pass along the bid / ask on their platform. A few clicks and you are done.
I called fidelity today to try to buy the enbridge bond issued a couple months ago. It was like pulling teeth. First off, they said they would only contact their bond desk for orders $50k or greater. And second, they said they would call me back.. but never did. Meanwhile, the bond was sitting on offer at interactive brokers the whole time.
My sense is that fidelity will eventually step up their bond game, but it may take a while.
BTW, the bid / ask on interactive brokers is 100.13 / 100.184 right now. Not too shabby.
Some of these bond traders are either lazy or greedy. They are all tapped into the same electronic networks.
Is there a CUSIP for this issue? or symbol ?
172967PE5
You can also find it on this link w/ all citi prefs.
https://www.citigroup.com/global/investors/fixed-income-investor-relations/capital-securities
Thank you, Mine.
‘Til Death Us Do Part?
534187BN8, LNC, 8.432 coup, May 66, BBB-, callable. DYODD.
Current yield = 12.6%, selling in smaller lots at 65.67 today, 50%+ if called.
I’ll keep digging and posting. Beats perp prefs. Know exactly what you are looking for. Me? Income for a few more turns around the Sun.
To plug a few holes. This is a subordinated note that floats (dont know when it starts floating). It is a Libor (SOFR by now I assume) plus 2.36%. LNC stated to hedge the variability of the payment, they purchased interest rate swaps with a 5% fixed rate yield for remaining term of the subordinated note.
Issued 2021, floats beginning August 2026. Fairly standard 5 year deferrable clause note feature being its a subordinated debt.
Grid, Help me out with my research. Where are you going to retieve bond data? My reference points are scattered all over. Do you have a definitive site? Going to the company’s website is usually no help. Maybe I need to focus right now on MY OWN due diligence. I had mentally jumbled the details of this with the previously release preferred which was exchange listed, ctreating a mistake.
Anyway, any references to a good, reliable source would be great.
TIA, JA
Edgar has a lot of them.
Here is this one.
https://www.sec.gov/Archives/edgar/data/59558/000119312521239292/d49809d424b3.htm
Thanks Justin, That’s why I like this site. JA
Joel, It seems convoluted but it is easy with practice. When I am serious I only use OSM (original source material). As a person I learned from stated…Anything less than OSM invites error creep into ones investing decisions which leads to sub optimal performance.
This is what I do. I took your info to find a cusip to actually make sure what the name of the bond was. Then I went to annual regulatory filings of LNC, and went immediately to their “debt section” to find the 2066 bond. There I found out under it that LNC has taken a 5% fixed swap for duration of debt. So this tells me the bond could pay 100% interest and they would not redeem because they mitigated the risk with the 5% swap until 2066. So there really is no incentive for them to redeem. But things happen who knows.
Anyways after finding that tidbit, I just scroll down to “exhibits” which have all the hyperlinks. And there on page 192, bottom, 4.26 is the link to the 2066 note.
https://www.sec.gov/ix?doc=/Archives/edgar/data/59558/000005955823000009/lnc-20221231x10k.htm
After you hit that link, you get the goods as linked below.
https://www.sec.gov/Archives/edgar/data/59558/000119312521244862/d171104dex46.htm
Its not as daunting as it seems after just a bit of practice. It took me less than 5 minutes from cradle to grave to know what it all was about through OSM.
Typically dont need to do it much because I keep what I own and trade pretty tight and already know what I need to know. But like this example, it comes in handy to know how to do it. As every now and then I will let a new member into my select own/trade club, ha.
Thanks for the reply. Holiday Love over the Miles!! JA
PS: Some minds are not as ‘voluminous’. Somebody said that, I don’t remember who it was.
I have some preferreds with LNC and they have been very reliable and stable at least so far. This bond is interesting and speculative. W/o checking the prospectus, here’s what eTrade said about details: Callable 08/26@100 – Floating/Variable Coupon – Quarterly Reset,3M LIBOR + 235.75BP until 08/17/2023 then 1DAY SOFR + 261.911BP – Conditional Calls – so at the next reset, probably will yield just under 8% if SOFR stays at 5.32 like it is today?
How about a challenge? How about bringing a fresh idea, even if you have not participated (owned) a suggested specific security before? We need fresh, actionable ideas! Please list pertinent details like CUSIP.
Here’s an open order I have out there, so don’t bump my price!
ATMOS ENERGY CORP
Symbol:ATO.GA CUSIP:049560AA3 Bond Type:CORP
Coupon Rate
6.75%
Maturity Date
7/15/2028
Last Trade Price
$103.96
Last Trade Yield
5.79%
Last Trade Date
9/26/2023
Callable
N
Next Call Date
N/A
Price/Yield Chart
Credit Rating
Moody’s® rating
A1
Non-Investment Grade Investment Grade
Standard & Poor’s rating
A-
Non-Investment Grade Investment Grade
Joel you must be using Internet broker as discussed here, they are the only one letting you do GTC on Bonds.
Mind if I ask what it is your looking for in a bond? Investment grade, below par, current yield, YTM, and what is your time frame your comfortable with?
Thought I would get the party started with these questions just for those just looking at bonds. Also everyone has different needs and risk appetite.
I think as an example FC looks at higher risk but short term to call
Joel, Have you noticed FINRA seems to have tweaked the search tool? Maybe all the people complaining helped. I know when I tried talking to a junior bond broker at Pershing he was lost as he had to ask me for the CUSIP # I had found on FIDO
https://www.finra.org/finra-data/fixed-income/corp-and-agency
Chas: I have managed to have good functionality with FINRA site. The info I posted about APO was a direct copy /paste from their info page , AFTER it had been entered on the Watchlist and directed to that security’s specifics. Of course, I had to only use backspace strokes to get rid of the open spaces and consolidate the content, but it is all navigable and decent after the workthrough over there. Appreciate the interest. ..HAha
keeping it simple, like this issue I posted. Ans whatever you are interested in watching, just bot or has an enticing future from your perspective!
Take your pick, Joel. Either bonds are overpriced relative to treasuries, or the bond jockeys are front running an upcoming heading lower period.
US investment-grade corporate bond spreads have breached a level not seen since 2022 as investors bet the Federal Reserve has reached the end of its rate hiking cycle.
https://www.bloomberg.com/news/articles/2023-11-24/credit-markets-signal-optimism-as-us-spreads-reach-year-lows#xj4y7vzkg
Joel, not sure how this will paste. I was just playing with the revised tool. What appealed to me was current yield and its on the outer edges of my hold to maturity. Note, it recently traded last week. Doesn’t always trade.
I feel safe in thinking that Abbvie will be around in 11yrs
CUSIP 00287YAR0
4.5%
Maturity Date
5/14/2035
Last Trade Price
$92.88
Last Trade Yield
5.33%
Last Trade Date
11/22/2023
Callable
Y
Next Call Date
11/14/2034
Rated A-
New bond issue at Fido. I am trying to buy a few today.
Toronto Dominion Bank
CUSIP: 89114XCJ0
Matures 11/30/2033
6%
Callable 11/30/2028
A/A1 rated
I like the 5 year call protection.
Has anyone seen any additional information on Lumen’s (and their subsidiaries) debt “restructure”/extension since the Nov 2 Bloomberg article?
The article stated, “According to the current agreement, certain Lumen term loan holders can receive cash and the ability to swap their debt for a new higher-ranking term loan, at the discretion of the “majority consenting parties.” The company plans to transfer 49% of assets of its business Qwest Corp. to subsidiaries that will guarantee the debt to improve the collateral tied to the loan. ” Wondering where that leaves outstanding Qwest debt ($1000 and baby) bonds?
I try to follow as I have Lumen 2025 debt. The restructure has been challenged and I do not know what the negotiations will result in. I think Bloomberg Law has the latest on this but I don’t subscribe.
Has anyone been interested in the long Enbridge Subordinated Notes issued to help pay for the Dominion acquisition? Baa3/BBB- 8.25% Ser A and 8.50% Ser B both due 1/15/2084. CUSIP on the B ser = 29250NBT1 and prospectus – https://www.sec.gov/Archives/edgar/data/895728/000110465923102319/tm2325426d12_424b5.htm
Both are resets based on the US Treas 5 year, with A first resetting in 2029 and B in 2034…… These are subordinated, so really not that much different than the preferreds credit wise but theoretically one notch up on the stack…. I see Fidelity not offering B ser but does show them being offered at a discount… Neither are bonds I’d be interested in due to the long maturity and par-ish type price but for IG quality, they seem attractive, don’t they? I’ll stick with the 3 USD preferreds I own with varying reset dates earlier than these and much greater discounts to liquidation preference prices
TDA pulled the long end corporate offerings, bummer. I guess the party’s over.
Here are some recent improvements to the FINRA Site that I was notified of: SAVING DATA COLUMNS in ‘your account’. And Watchlist Views. All the clicking around has been drastically reduced. I have been using the tool and find it better. Real time Last Trades seem to be accurate too, but at whatever volume. I have developed a working system in coord with IBKR TWS.
I am on the path of creating a personally managed annuity and now Normalization of Interest Rates Operations (NIRO, my own contribution to FinTalk…get the analogy? haha) has allowed me to work toward that.
Hi Joel,
I wanted to let you know that we released some new features that may make working with bond data easier for you. When you login to the bond watchlist: (This takes you to the Logon Page / Create Account)
https://ews.finra.org/auth/logon?realm=ews&goto=https%3A//gateway.finra.org/app/data%3FrcpRedirNum%3D1
you will have an option access Templates.
From there, you open and customize bond data you by choosing columns and applying filters and sorts. Then, you can SAVE those settings. Once you save a view, you have an option to share it. Go to My Reports tab and click the share icon as highlighted to get a link you can share to your customized view of the data.
I hope these features are helpful to you. If you’d like to discuss or have any feedback on the product, please let me know.
Sarah Rose (she/her)
Enterprise Data Platforms
FINRA
Joel
Thanks for pro-actively interacting with FINRA.
I am really having an opp to play with this site now and encourge anyone with indiv bond investing to go in and PLAY with this and click around uhtil it becomes familiar. On occation use the mouse rather than ENTER-key.
If anyone has tech skills to add, I keep getting a “clear cache and reopen on new browser” message which takes me out and re-sign in. Using Chrome, but can use alt if I need to download for this site??
Ditto Greg’s thanks, not only for engaging with them (I sent my feedback after the update debacle, heard an ineffectual ‘we’re sorry’ from them, and pessimistically assumed they’d make no change), but also for reporting back detail.
I see they also have added a ‘Submit Idea’ button since I last looked, which is better than nothing and could bode well. Here’s hoping they have a proactive product manager and empowered engineers to continue the updates…
Does anyone here have experience with the Senior Secured bonds issued by certain utility companies? What are these companies using to Secure the bonds, and what would a bankruptcy event look like? In particular, from an individual investor’s prospective.
Seems like the added protection of Senior and Secured would be a benefit on these longer duration bonds.
Here is an example bond CUSIP: 744448BZ3
I’m a long-time reader here, but first time posting. Thank you all for your insights!
Sorry, I just saw this new guy. Senior secured of course means the bonds would be backed by the physical assets of the company. It is also the top of the cap stack. Of course in bankruptcy one is counting on the physical assets to make whole the bond holder in liquidation. These arent really any safer in getting paid the interest. Just safer in terms of being first in line to get your capital back in a bankruptcy. Of course the price you pay for this place in line is lower yield in compared to the other debt stacks the company offers.
Shorter Duration:
ArcelorMittal S.A. 3.6%
Matures 07/16/2024
CUSIP = 03938LBB9
BBB-/Baa3
YTM = 6.15%
CITIGROUP INC 4%
Matures 08/05/2024
CUSIP = 172967HV6
BBB/Baa2
YTM =6.03%
Delta Air Lines, Inc 2.9%
Matures 10/28/2024
CUSIP = 247361ZU5
BB+/Baa3
YTM = 7.10%
MPLX LP 4.875%
Matures 12/01/2024
CUSIP = 55336VAG5
BBB/Baa2
YTM = 6.06%
American Tower Corp 2.95%
Matures 01/15/2025
CUSIP = 03027XAV2
BBB-/Baa3
YTM = 6.10%
Bank of America Corp 4%
Matures 01/22/2025
CUSIP = 06051GFM6
BBB+/A3
YTM = 6.20%
Goldman Sachs InterN 3.5%
Matures 01/23/2025
CUSIP = 38148LAC0
BBB+/A2
YTM = 6.17%
ARES CAP CORP 4.25%
Matures 03/01/2025
CUSIP = 04010LAV5
BBB-
YTM = 7.08%
The Boeing Co 2.5%
Matures 03/01/2025
CUSIP = 097023BJ3
BBB-/Baa2
YTM = 6.03%
The Charles Schwab C 3%
Matures 03/10/2025
CUSIP = 808513AL9
A-/A2
YTM = 6.20%
ONEOK Partners, L.P. 4.9%
Matures 03/15/2025
CUSIP = 68268NAP8
BBB/Baa2
YTM = 6.10%
US STEEL 6 7/8% 3/1/29 CUSIP # 912909AU2 Ca 3/1/24
Prospectus @ https://www.sec.gov/Archives/edgar/data/1163302/000110465921017073/tm214549-8_424b5.htm {B1/BB-]
With not very strong conviction I opened a small position in this bond at 98.23 as a possible play on an acquisition of X by another company. I’d be interested in other’s opinions. X has been in play now for a couple of months with at least 4 potential bidders, Cleveland Cliffs [CLF] considered to be the front runner. The bond has quite a complex Change of Control provision spelled out beginning on p S-49 which seems to provide strong protection should any Change of Control result in a downgrade by any rating agency as a result of an acquisition, Bottom line, it seems that a Change of Control, at the very least, will most likely result in this bond being called at a price of 101 or higher depending on the circumstances. Its first optional call date outside of a change of control is 3/1/24 @ 103.348 and there’s also a make whole call provision of some sort spelled out as well….
It is difficult to definitively conclude what could happen to this bond should X be taken over, particularly by CLF but looking at price trend on the bond itself, there does not appear to have been any impact to its market price as of yet based on the acquisition talks . Also of note, a bid by CLF has been sanctioned by the United Steel Workers so an acquistion by CLF has importantly been pre-blessed by labor.
There are of course plenty of risks involved in this play, but at this stage it seems almost certain that something is going to happen with X. Some bidders have intentions of either breaking it up or only bidding for parts of it and I don’t know what would happen to the bond in that circumstance. Also there’s regulatory risk due to the sensitive national interest concerns involving the steel industry, and of course, recessionary risks as well. However, Morgan Stanley just came out with an upgrade on X to overweight and a raised price target of $40 so that’s a plus. Also of note is the overall credit trend for X as a credit on its own has been up based on multiple upgrades by the rating agencies historically, so it has that going for it too…
2WR, I hold a small position in this as well, actually having bought it prior to these acquisition talks. I can’t add anything more information on the situation, but I’m glad I’m in good company! Thanks.
Muni bonds
Anyone else nibbling?
I’ve been able to get ~4.5% locked up GO munis from my state. That’s over 8% tax equivalent for corp debt for a much better credit.
And yes, 5+ year call protected and purchased near par.
Blue Horseshoe loves Canadian Bonds!!! Couldn’t help myself and jumped on the new issue from Bank of Montreal, CUSIP 06375MCE3, A+ rated, 10Yr, 6.5%.
TD Bank has one CUSIP 89114XBW2, 5Yr, A rated, 6.4% (paid Quarterly) that I’m looking at also.
Pig Pile,
Can you help me understand this one?
BB+ Baa3 Ally Finl Inc. 6.7% 02/14/2033 Callable
Cusip 02005NBS8 coupon: 6.700
Matures 02/14/2033 callable starting in 2032
Price 87.24800
Yield 8.718 YTW 8.718
I didn’t think Ally was in trouble, but ratings make it look like it (?).
Private you know more about the world of banking than a lot of people. It’s also been proven ratings have been lagging and not keeping up with current financial status of a company. Whether its true or not I recently read Ally financial has over 60% of it’s business in auto loans.
I apologize Private, You asked Pig pile for his opinion not me.
Charles, that was its total genesis. Remember Ally was GMAC Bank (GMAC). It was General Motors financing arm for cars. It has tried to branch away after it became a public company, but cars have been its historic bread and butter.
Hi Private,
Just my very humble opinion, but yes auto loans have been Ally’s thing, hence the danger associated with possible recession. I bought the common in the throes of the pandemic but I just don’t think I’d jump into it today. To be fair though, I have been reading about Ally’s ultimate demise for years now, and here they are still kicking.
FYI- Ally is beginning headcount reductions
https://x.com/GuyDealership/status/1707869653848952864?s=20
Just to share my experience today with my wife’s broker. A few people here may have 401k’s with their employer that is managed by T Rowe Price. If your close to retirement and considering staying with them and doing a rollover IRA and you might be interested in bond purchases or sales, you might consider looking at other brokerages to roll over to.
I placed an order for some bonds today with Fidelity and they showed active bid and offer. I went to my wife’s account and logged into T Rowe’s bond screener that I had to sign an agreement to use a while back. I still have to call in to place an order. All of T Rowe’s business goes through Pershing.
I set parameters and I assumed out of the 200 plus bonds showing that I was looking at their inventory of available bonds. After calling in, the person helping me couldn’t find 2 of the bonds I was looking at. I asked if there was someone else we could talk to so he called Pershing to see if they could find them. They could not. After opening my account with Fidelity and looking up a bond and drilling down I had an active Trace report showing in real time last sale at 10:59 today. Keeping the salesman on the phone we looked more at T Rowe’s bond screen and concluded the bonds showing had last sales from Friday and Thursday.
Conclusion. Their bond search tool was not active and only showed sales from the prior 24 hours. The salesman wasn’t even aware of this. Gasp!
I asked the person what was the use of a static bond search tool?
Oh, by the way he couldn’t look up the bonds I was talking about on their search tool without me having to give him the CUSIP
I gotta tell you – if you have a 401K (or similar), it might be worth spending a little time digging down to find out what exactly you are being charged for the privilege. The management companies are REALLY good at hiding how they get paid.
I had a 401K from a big computer company that I left in place after we were spun out. A couple of my financial analysis buddies dug down and figured out that the company was charging the investment manager a fee to manage our 401 plan (pay to play), and the charges were passed on to the participants in some really sneaky ways (I can’t remember exactly – it wasn’t a stand alone charge. It was something like charging a small hidden markup on things). So, the company was using the 401 plan as a profit center. Slimy. Rolled my 401 the next day.
Funny thing was that I told the story to an acquaintance several years later and he said his big employer would never do that – but when he dug in, they were doing exactly the same thing.
I think that specific action was eventually banned, but there are a lot of ways to get screwed by an employer who writes the 401 plan without anyone “on the other side of the table” to protect the employees.
I am not saying all employers are screwing their employees, but it might be worth a look at your plan to see exactly what you are paying for what you are getting.
Private, Fido with their active TRACE posted my buy in real time today. I would say T Rowe and Pershing are going to be yesterday’s leftovers.
’28 and ’29 SNV bonds looking pretty good with BBB.
DYODD (if you have figured out FINRA for which I have developed a roundabout and cumbersome manner).
Signed, Tranche Climber
No Joel,
I was trying out different guesses as to the first 3 anagrams of a cuisp but it was like throwing darts in the dark
Scroll down to look at my post of 8-6-23 on this page. It gives a basic outline/ordering on how to wade thru FINRA site. Use company name spelled out. Use cursor not Enter too.
Good Luck since they never did follow thru (twice) with my Zoom contact and “personal sharing”, even though I was logged in and ready.
BooHoo.
Ps: Thanks to the sharing and comradery on this site as I have been able to turn the ship over the last few years and REALLY retire! From Denver, rainy and cool.
Joel I purchased this today 233293AQ2 Dayton Power and Light due 4/152029
YTM 7.66
The individual investor is not the only one losing out with the new FINRA site. I tried again last Thurs (9-21) to place an order with a T Rowe bond rep.
I don’t know what they pay these people but it’s too much for not being able to do their job.
I already know their bond screener isn’t active. This time I wasn’t frustrated when I had the rep tell me give him the CUSIP then tell me to look at the screening tool give him the CUSIP only to tell me the bond wasn’t available.
I asked him why should I be doing his job? he’s the one who should be able to look up the bond.
Final outcome, he started saying hello, hello? I can’t hear you are you there? I kept saying I hear you, can you hear me? after about 20 seconds I heard nothing than a click and one last are you there? after I said yes I am still holding one final click and we were disconnected. Was there a bad connection? or was the sales rep the one who was frustrated this time?
Front line support is a hard job. What you have to realize is on their side they have KPI (Key performance indicators) for all their operations.
If you can’t get them to issue an order within 5min of the call interaction or transferring you to bond desk where speed is not measured. Give up and call again. Also they get points removed for all calls they can not immediately resolve themselves.
At the end of the day they are just rats on a wheel trying to keep getting their cheese.
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.