The last 2 weeks I have done very little as to buying and selling in our portfolios–although I continue to have some good til cancelled ‘buy’ orders in place, but no one has ‘given’ me shares recently, of course my offer is a wholesale price while sellers want retail.
I believe the last item I purchased was a 5.6% 1 year callable CD that JPMorgan was offering–now that rate has gone away and I see 5.50% available on Fido and 5.55% on eTrade. I’ll keep watching since almost every month there are maturities of treasuries and CDs, but I need to continue to scrutinize short dated maturity baby bonds from BDCs and that seems to be the best way to balance my CDs with high yield.
Just sitting back and collecting dividends and interest is most certainly a low stress way of investing – this is what we could only dream of a few years ago. I am certain that many investors out there are locking down 1 year, 2 year and 5 year rates and simply are content to watch the money come in—but we all know there is ‘reinvestment risk’ when those instruments mature–so the question is locking down 5% now for a few years in a CD versus taking more risk in an 8% BDC short maturity baby bond. Of course there is no right or wrong answer–everyone of us has needs and everyone is different.
So I see that Enbridge announced a giant acquisition of gas utilities from Dominion Energy. This may motivate me to look at the securities that Enbridge has outstanding (including their common shares)–maybe there is decent potential.
Today we have the ‘beige book’ being released at 1 pm (central)–we could well see some fireworks from this release.
Interest rates have popped back up and are at 4.25% area (10 year treasury)– we will see if this moves to challenge recent highs in the 4.36% area–a move above this level will open up potential moves higher.
Still like (1) Two Big to Fail with Fixed to Floating Rates (WFC, C, ST, GS) and (2) Investment Grade Fixed to Floating rates. However, I want coupons of around 6%+ with YTM’s of 6.5% to 7%. Not excited about fixed rate issues (yet). Made some small exceptions for RIV-A and F-D (25% positions).
Im not too excited about fixed perpetuals either, Steve. But I have recently bought a couple of the IG oldies plus 6% way below par. I have kept my floaters junky and high yield as I already have a Pig Pile load of CDs and TIPs/IBonds hiding in the closet like scaredy cats.
The market did give me mild amusement 5 star steak dinner flip flop though today thanks to dumb intercepting computer bots. I took advantage of a mid day big bid ask spread of over a dollar and sold all of my PCG-C share recently bought at a sub $16 blend in the $16.50s firing market orders at the wide spread. I then took the money and bought the corresponding 600 shares of PCG-D in $15.80s as I wasnt ready to leave the PCG junk family yet.
Yeah, lots of non-callable bank CDs (56% in FDIC Insured Bank). I have a laddered approach, next ladders expire on 10-23 and then 01-24. Depending on what the interest rate environment looks like, I might just leave the proceeds in the Money Market (SWVXX 5.22% but 0.34% expense ratio so it nets 4.88%). The difference in actual dollars in my pocket isn’t that great with Bank CD’s that are locked. Looks larger than it is. Schwab takes the money of your account when you order it versus when the CDs actually start to pay. Factor in a week or two of 0% interest and the delta narrows.
Some of my CDs are just “prisoners doing time” in the local jail so I leave the cash alone. I will start getting some maturities early next year and see how the lay of land is at that time. A fair amount of mine also are locked into 5 year noncallables bought last March or so with a 5-5.2% ish yield. So they were sent off to Leavenworth for extended hard time.
Grid, The amusing side of those brokered CDs and Treasuries that show a little red next to them is that we can wontonly buy more at the current better price, knowing that they’ll all go back to even at maturity. We’ve all been doing it long enough now they’re starting to roll off the end of the conveyor every 2-3 weeks. Within that bucket, happy to add even a small amount of duration when it pops up.
Like you, also started small add-on acquisitions of older utes again about 4 – 5 weeks back – though mighty quiet in the last two weeks as bids are not being hit. There’s no hurry and we can be patient waiting for the next “episode”. It absolutely, positively will happen.
PSA-H might not be a terrible idea for a short-term investment if you feel confident it will get redeemed in March of next year and you can get it under par. Currently trading at 24.82.
At that price the worst that could happen is you get “stuck” with a 5.64% yield on a preferred that will almost certainly get redeemed if rates decrease.
I don’t think there is any other play here besides recycling CDs and adding ever growing SGOV pile. Not even in the throws of the GFC was I this much in cash.
pig pile – I assume by cash you mean CDs etc?
Tim, Yes should have specified, CDs and I also consider SGOV a cash position as its very liquid and and available to jump on opportunities.
pig pile – I figured – ‘cash like’ vehicles. Thanks!
Yeah, I’ve been focusing mainly Treasuries of various maturity and a couple Federal Home Loan Bank bonds (gov-backed) as well. The CDs don’t appeal to me as much with their callable stature. To me, it’s akin to banks playing a base ball game and losing – then, if they start winning the game in the 5th or 6th inning, they can actually declare victory before the “game” is actually over!
But you might get to third base before the game is over so that’s something to look forward to.
Batter steps up to the plate, here’s the pitch-he’s going, and what a jump he’s got. He’s trying for third, here’s the throw, it’s in the dirt-safe at third! Holy cow, stolen base!
Phil Rizzuto……
Here’s my current playbook.
Taxable portfolio:
Add to ATH/D @16. Currently 25bps and willing to take it to 1%.
Add to LGGNY @13.5. Currently 50bps.
Add to PRU @85. Currently 50bps
Add to BAM @32. Currently 75bps
Initiate position in OWL @ 10.
BEP – 1% position, but I’m considering liquidating and taking the gain. I go back and forth on this.
Non-Taxable:
Started buying BDC baby bonds (CSWCZ, RWAYZ,SAZ,GAINL, GLADZ, WHFCL) up to 3%. Term yields of 8% are attractive (IMO) given the risk.
Started positions in a few REITS (BNL, ADC,GTY, HIW,VICI) given the sell offs, and have a list of others that I’ll start (PSTL, AHH) at the right prices.
Was wrong and sold off my BDCs after being up 7% YTD, and am now 15% cash. Waiting on the next market pullback to add back to my list, with each BDC being 3%.
For now, content to sit tight, collect divys and wait for the next time spreads blow out.
MP I assume by 3% you mean you would be willing to get back into the BDC’s as 3% of your holdings or 3% below where they are at? With a GTC bid sitting out there.
I’m willing for the BDC baby bond allocation (all together) to be 3% of total capital, while the actual BDCs I’m willing to go to 15% of capital. For the BDCs, I’ve identified the five I want to own for roughly 3% of capital, each. I keep two lists for BDCs (what I will own, and what I’d own for the right price).
That’s probably riskier than most, but I’ve done more work on BDCs than in pretty much any other space.
I have some ENB notes as part of my 5 IG year ladder – I maintain quarterly runs on this ladder. Generally like IG pipeline debt, and have quite a bit of it. I saw separately that ENB are issuing about $4B CAD of equity to help pay for this acquisition. – good for bondholders. It is an interesting acquisition in that they could (in theory) work to supply their gas utilities with ENB pipelines. Of course they could also buy a natural gas E&P firm and become completely vertically integrated.
Less obvious, there is also potentially a carbon capture play. CO2 generated by the utilities, as a product of combustion of CH4, can be captured, and transported via pipeline to a central CO2 sequestration facility. So ENB could hypothetically transport Methane to the plant and then transport CO2 away from the plant.
Tim, Why would you prefer to buy a jpmorgan 1 year cd, when a 1 yr treasury pays about the same? Even if it’s in a non-taxable account, or if you live in a state with no taxes, why not just a treasury? The only reason I could think is that you are betting that the cd won’t be called in 1yr, and that at that time you wouldn’t be able to buy a similar treasury, or maybe something I don’t understand?
Tim,
Re-posting as it may be interesting to understand :
Tim, Why would you prefer to buy a jpmorgan 1 year cd, when a 1 yr treasury pays about the same? Even if it’s in a non-taxable account, or if you live in a state with no taxes, why not just a treasury? The only reason I could think is that you are betting that the cd won’t be called in 1yr, and that at that time you wouldn’t be able to buy a similar treasury, or maybe something I don’t understand?
“Re-posting as it may be interesting to understand :”
It seems that although I thought this post asked a valid and interesting question in this forum, apparently it is not, as it does not receive a reply, so I guess I should “drop” it and not re-post anymore. My apologies if this question was out of place.
Dd,
No need to re-post. Your original post got 3 likes. I think you can take that, along with no replies, that your logic is sound.
And don’t forget we are taking about minutiae. Many don’t distinguish between a FDIC insured CD and treasury, especially in a tax deferred account.
I haven’t invested in this space, but do brokers charge different commissions for Brokered CD’s versus US Treasuries?
I know that the CD issuers pay commissions to brokers to sell the instruments (which is outlined in the prospectus), which the Treasury obviously does not.
Martin, Justin,
I take Martin’s observation. Thanks!
As for Justin’s question, idk. For secondary treasuries brokers do take a commission from you, some brokers a small commission (about 0.2) others a lot more!
But many brokers allow you to buy treasuries at auction paying just the auction price without any commissions. Whether they take a cut from the Treasury, idk (but it doesn’t really make any difference to me if they do, because you get the exact same price you would pay if bought at Treasury Direct).