Question About Corporate Bonds

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ImUrHuckleberry
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Question About Corporate Bonds

Post by ImUrHuckleberry »

We recently inherited some investment accounts that hold individual stocks, and to my surprise, what appear to be individual corporate bonds. My normal course of action would be to liquidate everything and purchase index funds at our AA. (And this is what we are doing with the stocks.) However, I'm not sure how to sell individual bonds, if there is a penalty for selling "early", etc. Also, I noticed that the interest rates seem to be quite good. But I have no idea if it might be because they were purchased a while ago, or if it's because they are really risky.

How do I approach working this out and deciding what to do? Here is a list from one account. (There are others in another account.)

AT&T INC 5.35% CPN: 5.350% Due : 11/1/2066 Callable at $25.000 on 11/1/2022
AT&T INC 5.625% CPN: 5.625% Due : 8/1/2067 Callable at $25.000 on 8/1/2023
DUKE ENERGY CORP CPN: 5.125% Due : 1/15/2073 Callable at $25.000 on 9/15/2020
ENTERGY ARKANSAS LLC 4.75% CPN: 4.750% Due : 6/1/2063 Callable at $25.000 on 9/15/2020
PRUDENTIAL FINANCIAL INC 5.70% CPN: 5.700% Due : 3/15/2053 Callable at $25.000 on 9/15/2020
QWEST CORP 6.125% 06/01/53 CPN: 6.125% Due : 6/1/2053 Callable at $25.000 on 9/15/2020
SEMPRA ENERGY 5.750% CPN: 5.750% Due : 7/1/2079 Callable at $25.000 on 10/1/2024
TELEPHONE & DATA SYS INC CPN: 6.625% Due : 3/31/2045 Callable at $25.000 on 9/15/2020
THE SOUTHERN CO 6.25%-A CPN: 6.250% Due : 10/15/2075 Callable at $25.000 on 10/15/2020
WR BERKLEY CORP 5.7% CPN: 5.700% Due : 3/30/2058 Callable at $25.000 on 3/30/2023
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patrick013
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Re: Question About Corporate Bonds

Post by patrick013 »

I wouldn't be surprised if all the bonds callable in 2020 are called.

That leaves the remaining bonds to look at. They are likely trading
at pretty good premiums. Market rates are over 3%. But, those being
called is also likely.

What would your cash flow look like if you took the premiums now and
reinvested in BBB bonds closer to par, or took the high interest payments
now and the bonds were called at 100 in a few years ? After tax.
age in bonds, buy-and-hold, 10 year business cycle
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Re: Question About Corporate Bonds

Post by Gill »

You won’t have to worry about most of the bonds. They will be called soon.
Gill
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000
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Re: Question About Corporate Bonds

Post by 000 »

ImUrHuckleberry wrote: Tue Aug 18, 2020 6:20 pm if there is a penalty for selling "early"
Yep (spread in the secondary market). But as posters above noted, you probably won't have to worry about that. :mrgreen:
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Rick Ferri
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Re: Question About Corporate Bonds

Post by Rick Ferri »

I concur with all the other comments. The bonds have high coupons and short call dates. They will likely be called because the companies can probably refinance at a lower interest rate. That's not guaranteed though. If you sell them now, you'll get a premium price, but I don't think you'll be able to achieve the same yield-to-worst if you hold them. The risk in holding them is that one or more of the bonds default. So your choices are a high potential total return by holding the bonds than going into a bond index fund versus a possible default.

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ImUrHuckleberry
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Re: Question About Corporate Bonds

Post by ImUrHuckleberry »

Thanks all. Sounds like most are likely to get called, and for the remaining I can perhaps try to figure out if any are at risk of default before making a decision?

I guess my next thread will be trying to figure out what the heck preferred shares are and how to figure out what to do with those.

For the first time ever I'm considering a fee only advisor to help me make some decisions. I'm used to dealing with just index funds and CDs.
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vineviz
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Re: Question About Corporate Bonds

Post by vineviz »

ImUrHuckleberry wrote: Tue Aug 18, 2020 6:20 pm We recently inherited some investment accounts that hold individual stocks, and to my surprise, what appear to be individual corporate bonds. My normal course of action would be to liquidate everything and purchase index funds at our AA. (And this is what we are doing with the stocks.) However, I'm not sure how to sell individual bonds, if there is a penalty for selling "early", etc. Also, I noticed that the interest rates seem to be quite good. But I have no idea if it might be because they were purchased a while ago, or if it's because they are really risky.

How do I approach working this out and deciding what to do? Here is a list from one account. (There are others in another account.)

AT&T INC 5.35% CPN: 5.350% Due : 11/1/2066 Callable at $25.000 on 11/1/2022
AT&T INC 5.625% CPN: 5.625% Due : 8/1/2067 Callable at $25.000 on 8/1/2023
DUKE ENERGY CORP CPN: 5.125% Due : 1/15/2073 Callable at $25.000 on 9/15/2020
ENTERGY ARKANSAS LLC 4.75% CPN: 4.750% Due : 6/1/2063 Callable at $25.000 on 9/15/2020
PRUDENTIAL FINANCIAL INC 5.70% CPN: 5.700% Due : 3/15/2053 Callable at $25.000 on 9/15/2020
QWEST CORP 6.125% 06/01/53 CPN: 6.125% Due : 6/1/2053 Callable at $25.000 on 9/15/2020
SEMPRA ENERGY 5.750% CPN: 5.750% Due : 7/1/2079 Callable at $25.000 on 10/1/2024
TELEPHONE & DATA SYS INC CPN: 6.625% Due : 3/31/2045 Callable at $25.000 on 9/15/2020
THE SOUTHERN CO 6.25%-A CPN: 6.250% Due : 10/15/2075 Callable at $25.000 on 10/15/2020
WR BERKLEY CORP 5.7% CPN: 5.700% Due : 3/30/2058 Callable at $25.000 on 3/30/2023
My advice is to simply keep the bonds. As others have said, many bonds will be called soon anyway and the rest will provide a steady stream of funds with which to rebalance.

Small lots of individual bonds don’t tend to be incredibly liquid, which means the spread between the bid price and the asking price is often relatively wide. You could certainly sell them if you HAD to, but why sell at a discount for no good reason?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Rick Ferri
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Re: Question About Corporate Bonds

Post by Rick Ferri »

ImUrHuckleberry wrote: Tue Aug 18, 2020 7:28 pm I guess my next thread will be trying to figure out what the heck preferred shares are and how to figure out what to do with those.
Preferreds sit on a balance sheet between stocks and bonds. They have high dividend payments but don't appreciate like common stock. Many bank holding companies (Goldman, JP Morgan, Wells Fargo) issue preferred stock because it doesn't count as debt in their liquidity ratios, and it doesn't dilute shareholder value. Preferred dividends are often "qualified", which means the income is taxed at a lower capital gains rate rather than an ordinary interest rate. The downside is that dividends can be eliminated in a cash crunch. So, you want high-quality companies.

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ImUrHuckleberry
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Re: Question About Corporate Bonds

Post by ImUrHuckleberry »

Rick Ferri wrote: Tue Aug 18, 2020 7:43 pm
ImUrHuckleberry wrote: Tue Aug 18, 2020 7:28 pm I guess my next thread will be trying to figure out what the heck preferred shares are and how to figure out what to do with those.
Preferreds sit on a balance sheet between stocks and bonds. They have high dividend payments but don't appreciate like common stock. Many bank holding companies (Goldman, JP Morgan, Wells Fargo) issue preferred stock because it doesn't count as debt in their liquidity ratios, and it doesn't dilute shareholder value. Preferred dividends are often "qualified", which means the income is taxed at a lower capital gains rate rather than an ordinary interest rate. The downside is that dividends can be eliminated in a cash crunch. So, you want high-quality companies.

Rick Ferri
Thank you for the response. You are correct that most of them are banks. If they don't appreciate, does that mean they don't trade on the open market? Seems like I should probably just liquidate these and buy index funds? Or do you think it's worth hiring a fee only advisor to look at them and help me decide? There are about 40 individual stocks, mostly preferred stocks but a few common stocks.
000
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Re: Question About Corporate Bonds

Post by 000 »

ImUrHuckleberry wrote: Tue Aug 18, 2020 7:52 pm
Rick Ferri wrote: Tue Aug 18, 2020 7:43 pm
ImUrHuckleberry wrote: Tue Aug 18, 2020 7:28 pm I guess my next thread will be trying to figure out what the heck preferred shares are and how to figure out what to do with those.
Preferreds sit on a balance sheet between stocks and bonds. They have high dividend payments but don't appreciate like common stock. Many bank holding companies (Goldman, JP Morgan, Wells Fargo) issue preferred stock because it doesn't count as debt in their liquidity ratios, and it doesn't dilute shareholder value. Preferred dividends are often "qualified", which means the income is taxed at a lower capital gains rate rather than an ordinary interest rate. The downside is that dividends can be eliminated in a cash crunch. So, you want high-quality companies.

Rick Ferri
Thank you for the response. You are correct that most of them are banks. If they don't appreciate, does that mean they don't trade on the open market? Seems like I should probably just liquidate these and buy index funds? Or do you think it's worth hiring a fee only advisor to look at them and help me decide? There are about 40 individual stocks, mostly preferred stocks but a few common stocks.
Preferreds trade on the secondary market. May be painful to sell, but unlike the bonds you will either have to sell or (possibly) hold forever.
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Re: Question About Corporate Bonds

Post by ImUrHuckleberry »

000 wrote: Tue Aug 18, 2020 7:57 pm
ImUrHuckleberry wrote: Tue Aug 18, 2020 7:52 pm
Rick Ferri wrote: Tue Aug 18, 2020 7:43 pm
ImUrHuckleberry wrote: Tue Aug 18, 2020 7:28 pm I guess my next thread will be trying to figure out what the heck preferred shares are and how to figure out what to do with those.
Preferreds sit on a balance sheet between stocks and bonds. They have high dividend payments but don't appreciate like common stock. Many bank holding companies (Goldman, JP Morgan, Wells Fargo) issue preferred stock because it doesn't count as debt in their liquidity ratios, and it doesn't dilute shareholder value. Preferred dividends are often "qualified", which means the income is taxed at a lower capital gains rate rather than an ordinary interest rate. The downside is that dividends can be eliminated in a cash crunch. So, you want high-quality companies.

Rick Ferri
Thank you for the response. You are correct that most of them are banks. If they don't appreciate, does that mean they don't trade on the open market? Seems like I should probably just liquidate these and buy index funds? Or do you think it's worth hiring a fee only advisor to look at them and help me decide? There are about 40 individual stocks, mostly preferred stocks but a few common stocks.
Preferreds trade on the secondary market. May be painful to sell, but unlike the bonds you will either have to sell or (possibly) hold forever.
Thanks. Are the current values in the brokerage account accurate? Like right now every one has a value "as of 18-August". Do you know if the secondary market is liquid enough that these values are reasonably close to what I could expect to sell them for?
000
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Re: Question About Corporate Bonds

Post by 000 »

ImUrHuckleberry wrote: Tue Aug 18, 2020 8:01 pm Thanks. Are the current values in the brokerage account accurate? Like right now every one has a value "as of 18-August". Do you know if the secondary market is liquid enough that these values are reasonably close to what I could expect to sell them for?
No clue, I don't trade preferreds. I'm guessing you will experience more pain than the displayed value. :twisted:

The only way to know is to try. Good luck!

P.S. If you want to pay someone for help, you could try a broker-assisted trade over the phone for your first trade.
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Re: Question About Corporate Bonds

Post by abuss368 »

You may want to stay with the bonds and collect the interest payments. I am thinking the bonds will be called as you move forward.

That however is offset by the risk of default.
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Re: Question About Corporate Bonds

Post by abuss368 »

Rick Ferri wrote: Tue Aug 18, 2020 7:43 pm
ImUrHuckleberry wrote: Tue Aug 18, 2020 7:28 pm I guess my next thread will be trying to figure out what the heck preferred shares are and how to figure out what to do with those.
Preferreds sit on a balance sheet between stocks and bonds. They have high dividend payments but don't appreciate like common stock. Many bank holding companies (Goldman, JP Morgan, Wells Fargo) issue preferred stock because it doesn't count as debt in their liquidity ratios, and it doesn't dilute shareholder value. Preferred dividends are often "qualified", which means the income is taxed at a lower capital gains rate rather than an ordinary interest rate. The downside is that dividends can be eliminated in a cash crunch. So, you want high-quality companies.

Rick Ferri
Thank Rick for that excellent explanation. I also read the attached definition on Investopedia: https://www.investopedia.com/terms/p/preferredstock.asp
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Re: Question About Corporate Bonds

Post by patrick013 »

ImUrHuckleberry wrote: Tue Aug 18, 2020 8:01 pm
000 wrote: Tue Aug 18, 2020 7:57 pm
ImUrHuckleberry wrote: Tue Aug 18, 2020 7:52 pm
Rick Ferri wrote: Tue Aug 18, 2020 7:43 pm
ImUrHuckleberry wrote: Tue Aug 18, 2020 7:28 pm I guess my next thread will be trying to figure out what the heck preferred shares are and how to figure out what to do with those.
Preferreds sit on a balance sheet between stocks and bonds. They have high dividend payments but don't appreciate like common stock. Many bank holding companies (Goldman, JP Morgan, Wells Fargo) issue preferred stock because it doesn't count as debt in their liquidity ratios, and it doesn't dilute shareholder value. Preferred dividends are often "qualified", which means the income is taxed at a lower capital gains rate rather than an ordinary interest rate. The downside is that dividends can be eliminated in a cash crunch. So, you want high-quality companies.

Rick Ferri
Thank you for the response. You are correct that most of them are banks. If they don't appreciate, does that mean they don't trade on the open market? Seems like I should probably just liquidate these and buy index funds? Or do you think it's worth hiring a fee only advisor to look at them and help me decide? There are about 40 individual stocks, mostly preferred stocks but a few common stocks.
Preferreds trade on the secondary market. May be painful to sell, but unlike the bonds you will either have to sell or (possibly) hold forever.
Thanks. Are the current values in the brokerage account accurate? Like right now every one has a value "as of 18-August". Do you know if the secondary market is liquid enough that these values are reasonably close to what I could expect to sell them for?
You could put in a limit order for a higher price for preferred stock to sell online.

Check the prices back a year or two to see normal price range. Prices could be higher due to the overall preferred market and yields. Your tax basis would be determined by your inheritance value so taxable gains should be small if prices are high and you decide to sell. Try to avoid a loss and increase cash flow anyway.

Large banks are generally stable with govt support. What is your highest yielding preferred stock ? It may be a good income producer for a small investment. What is your largest holding, for example ?

The only thing I don't like about preferred is most are BBB rated, but keep paying dividends however.
age in bonds, buy-and-hold, 10 year business cycle
capjak
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Re: Question About Corporate Bonds

Post by capjak »

I have some preferred stocks that pay 5-6% qualified dividend that intend to keep forever, some have been callable for 10+years.

Always buy/sell with a limit order and can use GTC. Some are very liquid (high volume, bid/ask price is very close, look at daily volume), others are almost never traded (large bid/ask difference).
Valuethinker
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Re: Question About Corporate Bonds

Post by Valuethinker »

ImUrHuckleberry wrote: Tue Aug 18, 2020 6:20 pm We recently inherited some investment accounts that hold individual stocks, and to my surprise, what appear to be individual corporate bonds. My normal course of action would be to liquidate everything and purchase index funds at our AA. (And this is what we are doing with the stocks.) However, I'm not sure how to sell individual bonds, if there is a penalty for selling "early", etc. Also, I noticed that the interest rates seem to be quite good. But I have no idea if it might be because they were purchased a while ago, or if it's because they are really risky.

How do I approach working this out and deciding what to do? Here is a list from one account. (There are others in another account.)

AT&T INC 5.35% CPN: 5.350% Due : 11/1/2066 Callable at $25.000 on 11/1/2022
AT&T INC 5.625% CPN: 5.625% Due : 8/1/2067 Callable at $25.000 on 8/1/2023
DUKE ENERGY CORP CPN: 5.125% Due : 1/15/2073 Callable at $25.000 on 9/15/2020
ENTERGY ARKANSAS LLC 4.75% CPN: 4.750% Due : 6/1/2063 Callable at $25.000 on 9/15/2020
PRUDENTIAL FINANCIAL INC 5.70% CPN: 5.700% Due : 3/15/2053 Callable at $25.000 on 9/15/2020
QWEST CORP 6.125% 06/01/53 CPN: 6.125% Due : 6/1/2053 Callable at $25.000 on 9/15/2020
SEMPRA ENERGY 5.750% CPN: 5.750% Due : 7/1/2079 Callable at $25.000 on 10/1/2024
TELEPHONE & DATA SYS INC CPN: 6.625% Due : 3/31/2045 Callable at $25.000 on 9/15/2020
THE SOUTHERN CO 6.25%-A CPN: 6.250% Due : 10/15/2075 Callable at $25.000 on 10/15/2020
WR BERKLEY CORP 5.7% CPN: 5.700% Due : 3/30/2058 Callable at $25.000 on 3/30/2023
These are all callable bonds. As long as none of them are rated "junk" (ie below BBB- for S&P and Fitch credit rating; Baa3 for Moody's) aka "high yield" they are very likely to be called. In fact as the WR Berkley bond is the only one not due to be called this year (other than the AT&T one which should be fine) that's the only one I would check.

When you check the yields to maturity on these bonds, if you do, look for "Yield To Call". If that is significantly below the YTM then the market is expecting these bonds to be called and the bond price will reflect that.

I would wait until they are called, collect the proceeds and reinvest the money.
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Re: Question About Corporate Bonds

Post by Valuethinker »

ImUrHuckleberry wrote: Tue Aug 18, 2020 8:01 pm
000 wrote: Tue Aug 18, 2020 7:57 pm
ImUrHuckleberry wrote: Tue Aug 18, 2020 7:52 pm
Rick Ferri wrote: Tue Aug 18, 2020 7:43 pm
ImUrHuckleberry wrote: Tue Aug 18, 2020 7:28 pm I guess my next thread will be trying to figure out what the heck preferred shares are and how to figure out what to do with those.
Preferreds sit on a balance sheet between stocks and bonds. They have high dividend payments but don't appreciate like common stock. Many bank holding companies (Goldman, JP Morgan, Wells Fargo) issue preferred stock because it doesn't count as debt in their liquidity ratios, and it doesn't dilute shareholder value. Preferred dividends are often "qualified", which means the income is taxed at a lower capital gains rate rather than an ordinary interest rate. The downside is that dividends can be eliminated in a cash crunch. So, you want high-quality companies.

Rick Ferri
Thank you for the response. You are correct that most of them are banks. If they don't appreciate, does that mean they don't trade on the open market? Seems like I should probably just liquidate these and buy index funds? Or do you think it's worth hiring a fee only advisor to look at them and help me decide? There are about 40 individual stocks, mostly preferred stocks but a few common stocks.
Preferreds trade on the secondary market. May be painful to sell, but unlike the bonds you will either have to sell or (possibly) hold forever.
Thanks. Are the current values in the brokerage account accurate? Like right now every one has a value "as of 18-August". Do you know if the secondary market is liquid enough that these values are reasonably close to what I could expect to sell them for?
Preference shares are a form of stock that is a bit like a bond. They pay a fixed dividend, usually a fixed rate for each $10 of par value, say. They tend to be issued by financial institutions as a way of increasing their capital, which regulators like and demand, without having to issue new common stock which will dilute ordinary shareholders. Same for utilities (regulatory). However any corporate bond has a higher ranking in terms of getting paid than a preference share issued by the same company. So they are relatively risky if things go on. And they don't share in the upside usually that common stock does if a company does very well.

Current values are likely accurate. You should be able to tell when they were last traded - what date. And get an ideal for the daily volume (it's not unusual that a holding of a few hundred or thousand shares is the *only* trade that day).

What happens is the bid-ask spreads (you buy at the higher, the ask, you sell at the lower, the bid; if you are a retail investor you can sometimes do better than the bid price) tend to be wide for these sorts of securities.

You may want to place a limit order to prevent getting a price which is below the bid price (if there is no ready buyer, the market will push the bid price down on you).

I'd sort them into 3 piles:

Sell Now

- all common stock
- any preferred shares where there are concerns re financial health of issuer. Best way to do that is to look up their credit rating (usually under bond investors part of their Investor Relations website). If BBB- (S&P) / Baa3 (Moody's) & negative credit watch on BBB/ Baa2 then I would probably sell - the credit rating is just above junk/ high yield (below BBB-) or it is headed downwards. Bond holders will get paid out before preferred share holders, so you are not likely to get much money

Sell this tax year, next tax year, tax year after that
ie in a tax efficient manner

- anything else that is not in the above. I would then simply seek to spread my sales in a tax efficient manner. Always remembering that "minimize regret" by selling half right now is not a bad strategy

Sell never

- there's probably nothing in this pile but you might find something that is so blue chip or has sentimental value

Always in this your bias should be to sell. Because you need never, then, have to worry about that investment again. And "sunk cost rule" -if you would not now buy these securities, then you should not be holding them.

I should add. Some Preferred Shares have a redemption date. If that's soon, then you can wait and get the Par Value back. If the price now is significantly more than the Par Value, that reflects 1). a dividend significantly better than current market interest rates 2). the expectation that that dividend will be paid. But if the shares don'r redeem in the next 15 months or so, I'd probably just sell them as soon as you can.
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Re: Question About Corporate Bonds

Post by vineviz »

vineviz wrote: Tue Aug 18, 2020 7:35 pm My advice is to simply keep the bonds. As others have said, many bonds will be called soon anyway and the rest will provide a steady stream of funds with which to rebalance.

Small lots of individual bonds don’t tend to be incredibly liquid, which means the spread between the bid price and the asking price is often relatively wide. You could certainly sell them if you HAD to, but why sell at a discount for no good reason?
One thing I should have added is that some corporations may choose to delay calling their bonds for liquidity reasons. I'm not sure how likely this is, since many companies scrambled to issue new debt in Q2 and thus are now reasonably flush with cash. Any delay would be a great outcome for you, since you'd be collecting very high coupon payments in a world that offers very low yields for similar quality new issues.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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ImUrHuckleberry
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Re: Question About Corporate Bonds

Post by ImUrHuckleberry »

Thanks everyone for the comments.

I went back to the online accounts and found that I was able to download a spreadsheet that contained just about all the key pieces of information mentioned above for each holding. I think with all of the advice provided I'm going to try and deal with these myself. I'm going to sell all the common stock, keep all the bonds rated above junk until they get called and attempt to sell the rest, and then make decisions on each preferred stock individually.
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Re: Question About Corporate Bonds

Post by not4me »

I may have not looked at this as closely as others, but I have a different take. I sampled the list & didn't find a bond; they were all "baby bonds" or exchange traded debt (again, just a sampling). These will (in at least 1 case are already) be callable at $25, but currently are worth more than that. Since you recently inherited, if you wait until they are called you'll have a long term capital loss. That might not be bad depending on your tax situation, just thought I'd pass that along. (I didn't check, but my experience is that usually the dividend is not qualified. Not always, so you might want to check). I wouldn't expect it to be as likely these will be called as a bond. Different series can have difference characteristics, so check each

Edited to change: originally I used the term "preferred" & it is (likely) more correct to use "baby bonds". Without a cusip, I'm guessing a bit anyway. Apologies for being in too much a hurry before & using the term I had read in some of the posts.
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ImUrHuckleberry
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Re: Question About Corporate Bonds

Post by ImUrHuckleberry »

not4me wrote: Wed Aug 19, 2020 3:43 pm I may have not looked at this as closely as others, but I have a different take. I sampled the list & didn't find a bond; they were all "baby bonds" or exchange traded debt (again, just a sampling). These will (in at least 1 case are already) be callable at $25, but currently are worth more than that. Since you recently inherited, if you wait until they are called you'll have a long term capital loss. That might not be bad depending on your tax situation, just thought I'd pass that along. (I didn't check, but my experience is that usually the dividend is not qualified. Not always, so you might want to check). I wouldn't expect it to be as likely these will be called as a bond. Different series can have difference characteristics, so check each

Edited to change: originally I used the term "preferred" & it is (likely) more correct to use "baby bonds". Without a cusip, I'm guessing a bit anyway. Apologies for being in too much a hurry before & using the term I had read in some of the posts.
Hmmm, I just assumed they were bonds and not preferred stocks because the broker listed them as fixed income. Here is the full list for one of the accounts, with a little more info:

Product Type Name Open Order Symbol
Stocks / Options ALABAMA POWER CO 5%-A Rate: 1.250% No ALP.Q
Stocks / Options AMERICAN ELECTRIC POWER CO No AEP
Stocks / Options AMERICAN INTERNATIONAL 5.85%-A Rate: 1.462% No AIG.A
Stocks / Options ATLAS CORP FIX FLT CM PFD I Rate: 2.000% No ATCO.I
Stocks / Options BANK OF AMERICA CORP 6%-GG Rate: 1.500% No BAC.B
Stocks / Options CAP ONE FINL CO 5.2% SER-G Rate: 1.300% No COF.G
Stocks / Options CAPITAL ONE FINANCIAL 5%-I PRF Rate: 1.250% No COF.I
Stocks / Options DIGITAL RLTY TST INC 5.20%SERL Rate: 1.300% No DLR.L
Stocks / Options DUKE ENERGY CORP 5.75%-A Rate: 1.438% No DUK.A
Stocks / Options FIFTH THIRD BANCORP 4.95% S-K Rate: 1.238% No FITBO
Stocks / Options JPMORGAN CHASE & CO 6.15% BB Rate: 1.537% No JPM.H
Stocks / Options METLIFE INC 5.62% NCUM PFD E Rate: 1.406% No MET.E
Stocks / Options MORGAN STANLEY 4.875% SER-L Rate: 1.219% No MS.L
Stocks / Options NORTHERN TRUST CORP 4.70% S-E Rate: 1.175% No NTRSO
Stocks / Options PUBLIC STORAGE 5.20%-W Rate: 1.300% No PSA.W
Stocks / Options SPIRE INC 5.90% SER-A Rate: 1.475% No SR.A
Stocks / Options TRITON INTL LTD 8.50% A Rate: 2.125% No TRTN.A
Stocks / Options VORNADO REALTY TR SER-L 5.40% Rate: 1.350% No VNO.L
Stocks / Options WELLS FARGO & CO 5.5% SER-X Rate: 1.375% No WFC.X
Stocks / Options WELLS FARGO & CO 5.7%-W Rate: 1.425% No WFC.W
Stocks / Options WELLS FARGO & COMPANY 5.625%-Y Rate: 1.406% No WFC.Y
Corporate Fixed Income AT&T INC 5.35% CPN: 5.350% Due : 11/1/2066 Callable at $25.000 on 11/1/2022 No TBB
Corporate Fixed Income AT&T INC 5.625% CPN: 5.625% Due : 8/1/2067 Callable at $25.000 on 8/1/2023 No TBC
Corporate Fixed Income DUKE ENERGY CORP CPN: 5.125% Due : 1/15/2073 Callable at $25.000 on 9/15/2020 No DUKH
Corporate Fixed Income ENTERGY ARKANSAS LLC 4.75% CPN: 4.750% Due : 6/1/2063 Callable at $25.000 on 9/15/2020 No EAE
Corporate Fixed Income PRUDENTIAL FINANCIAL INC 5.70% CPN: 5.700% Due : 3/15/2053 Callable at $25.000 on 9/15/2020 No PRH
Corporate Fixed Income QWEST CORP 6.125% 06/01/53 CPN: 6.125% Due : 6/1/2053 Callable at $25.000 on 9/15/2020 No CTY
Corporate Fixed Income SEMPRA ENERGY 5.750% CPN: 5.750% Due : 7/1/2079 Callable at $25.000 on 10/1/2024 No SREA
Corporate Fixed Income TELEPHONE & DATA SYS INC CPN: 6.625% Due : 3/31/2045 Callable at $25.000 on 9/15/2020 No TDI
Corporate Fixed Income THE SOUTHERN CO 6.25%-A CPN: 6.250% Due : 10/15/2075 Callable at $25.000 on 10/15/2020 No SOJA
Corporate Fixed Income WR BERKLEY CORP 5.7% CPN: 5.700% Due : 3/30/2058 Callable at $25.000 on 3/30/2023 No WRB.E
Topic Author
ImUrHuckleberry
Posts: 491
Joined: Sat Apr 15, 2017 7:44 am

Re: Question About Corporate Bonds

Post by ImUrHuckleberry »

Now I'm back to thinking I might need a fee only advisor ha ha.
User avatar
AlabamaPaul
Posts: 106
Joined: Sat Jul 18, 2020 2:45 pm

Re: Question About Corporate Bonds

Post by AlabamaPaul »

ImUrHuckleberry wrote: Wed Aug 19, 2020 4:31 pm Now I'm back to thinking I might need a fee only advisor ha ha.
Or find an advisor who will help you for a fixed fee for a one-off consultation...
not4me
Posts: 893
Joined: Thu May 25, 2017 3:08 pm

Re: Question About Corporate Bonds

Post by not4me »

ImUrHuckleberry wrote: Wed Aug 19, 2020 4:24 pm
not4me wrote: Wed Aug 19, 2020 3:43 pm I may have not looked at this as closely as others, but I have a different take. I sampled the list & didn't find a bond; they were all "baby bonds" or exchange traded debt (again, just a sampling). These will (in at least 1 case are already) be callable at $25, but currently are worth more than that. Since you recently inherited, if you wait until they are called you'll have a long term capital loss. That might not be bad depending on your tax situation, just thought I'd pass that along. (I didn't check, but my experience is that usually the dividend is not qualified. Not always, so you might want to check). I wouldn't expect it to be as likely these will be called as a bond. Different series can have difference characteristics, so check each

Edited to change: originally I used the term "preferred" & it is (likely) more correct to use "baby bonds". Without a cusip, I'm guessing a bit anyway. Apologies for being in too much a hurry before & using the term I had read in some of the posts.
Hmmm, I just assumed they were bonds and not preferred stocks because the broker listed them as fixed income. Here is the full list for one of the accounts, with a little more info:

Product Type Name Open Order Symbol
Stocks / Options ALABAMA POWER CO 5%-A Rate: 1.250% No ALP.Q
Stocks / Options AMERICAN ELECTRIC POWER CO No AEP
Stocks / Options AMERICAN INTERNATIONAL 5.85%-A Rate: 1.462% No AIG.A
Stocks / Options ATLAS CORP FIX FLT CM PFD I Rate: 2.000% No ATCO.I
Stocks / Options BANK OF AMERICA CORP 6%-GG Rate: 1.500% No BAC.B
Stocks / Options CAP ONE FINL CO 5.2% SER-G Rate: 1.300% No COF.G
Stocks / Options CAPITAL ONE FINANCIAL 5%-I PRF Rate: 1.250% No COF.I
Stocks / Options DIGITAL RLTY TST INC 5.20%SERL Rate: 1.300% No DLR.L
Stocks / Options DUKE ENERGY CORP 5.75%-A Rate: 1.438% No DUK.A
Stocks / Options FIFTH THIRD BANCORP 4.95% S-K Rate: 1.238% No FITBO
Stocks / Options JPMORGAN CHASE & CO 6.15% BB Rate: 1.537% No JPM.H
Stocks / Options METLIFE INC 5.62% NCUM PFD E Rate: 1.406% No MET.E
Stocks / Options MORGAN STANLEY 4.875% SER-L Rate: 1.219% No MS.L
Stocks / Options NORTHERN TRUST CORP 4.70% S-E Rate: 1.175% No NTRSO
Stocks / Options PUBLIC STORAGE 5.20%-W Rate: 1.300% No PSA.W
Stocks / Options SPIRE INC 5.90% SER-A Rate: 1.475% No SR.A
Stocks / Options TRITON INTL LTD 8.50% A Rate: 2.125% No TRTN.A
Stocks / Options VORNADO REALTY TR SER-L 5.40% Rate: 1.350% No VNO.L
Stocks / Options WELLS FARGO & CO 5.5% SER-X Rate: 1.375% No WFC.X
Stocks / Options WELLS FARGO & CO 5.7%-W Rate: 1.425% No WFC.W
Stocks / Options WELLS FARGO & COMPANY 5.625%-Y Rate: 1.406% No WFC.Y
Corporate Fixed Income AT&T INC 5.35% CPN: 5.350% Due : 11/1/2066 Callable at $25.000 on 11/1/2022 No TBB
Corporate Fixed Income AT&T INC 5.625% CPN: 5.625% Due : 8/1/2067 Callable at $25.000 on 8/1/2023 No TBC
Corporate Fixed Income DUKE ENERGY CORP CPN: 5.125% Due : 1/15/2073 Callable at $25.000 on 9/15/2020 No DUKH
Corporate Fixed Income ENTERGY ARKANSAS LLC 4.75% CPN: 4.750% Due : 6/1/2063 Callable at $25.000 on 9/15/2020 No EAE
Corporate Fixed Income PRUDENTIAL FINANCIAL INC 5.70% CPN: 5.700% Due : 3/15/2053 Callable at $25.000 on 9/15/2020 No PRH
Corporate Fixed Income QWEST CORP 6.125% 06/01/53 CPN: 6.125% Due : 6/1/2053 Callable at $25.000 on 9/15/2020 No CTY
Corporate Fixed Income SEMPRA ENERGY 5.750% CPN: 5.750% Due : 7/1/2079 Callable at $25.000 on 10/1/2024 No SREA
Corporate Fixed Income TELEPHONE & DATA SYS INC CPN: 6.625% Due : 3/31/2045 Callable at $25.000 on 9/15/2020 No TDI
Corporate Fixed Income THE SOUTHERN CO 6.25%-A CPN: 6.250% Due : 10/15/2075 Callable at $25.000 on 10/15/2020 No SOJA
Corporate Fixed Income WR BERKLEY CORP 5.7% CPN: 5.700% Due : 3/30/2058 Callable at $25.000 on 3/30/2023 No WRB.E
So, just using Duke Power as an example (& somewhere you probably have CUSIPs to double check this...). In the "Stock / Options" list is a preferred series A. Tickers for preferreds can differ between lookups, but may be something like "DUK.A", or "DUK_PRA" etc. Looks like today it traded at $28.30 & almost 53K shares were traded. in the fixed income, there is an exchange traded debt that has ticker DUKH. It closed at $25.94 and just under 17k were traded. It's been callable since 2018 & isn't qualified (I didn't pull the prospectus to verify these). I suspect they both pay quarterly.
Topic Author
ImUrHuckleberry
Posts: 491
Joined: Sat Apr 15, 2017 7:44 am

Re: Question About Corporate Bonds

Post by ImUrHuckleberry »

not4me wrote: Wed Aug 19, 2020 4:42 pm So, just using Duke Power as an example (& somewhere you probably have CUSIPs to double check this...). In the "Stock / Options" list is a preferred series A. Tickers for preferreds can differ between lookups, but may be something like "DUK.A", or "DUK_PRA" etc. Looks like today it traded at $28.30 & almost 53K shares were traded. in the fixed income, there is an exchange traded debt that has ticker DUKH. It closed at $25.94 and just under 17k were traded. It's been callable since 2018 & isn't qualified (I didn't pull the prospectus to verify these). I suspect they both pay quarterly.
Yes, looks like you are correct. Thanks! The CUSIP for DUKH is listed as 26441C303.

When the callable date comes, does the company have a certain amount of time to either call it or not? (The reason I ask, is the brokerage data says DUKH is callable on 9/15/2020 while you said it has been callable since 2018. Just trying to understand in a little more depth.)
7eight9
Posts: 1440
Joined: Fri May 17, 2019 7:11 pm

Re: Question About Corporate Bonds

Post by 7eight9 »

ImUrHuckleberry wrote: Wed Aug 19, 2020 5:01 pm
not4me wrote: Wed Aug 19, 2020 4:42 pm So, just using Duke Power as an example (& somewhere you probably have CUSIPs to double check this...). In the "Stock / Options" list is a preferred series A. Tickers for preferreds can differ between lookups, but may be something like "DUK.A", or "DUK_PRA" etc. Looks like today it traded at $28.30 & almost 53K shares were traded. in the fixed income, there is an exchange traded debt that has ticker DUKH. It closed at $25.94 and just under 17k were traded. It's been callable since 2018 & isn't qualified (I didn't pull the prospectus to verify these). I suspect they both pay quarterly.
Yes, looks like you are correct. Thanks! The CUSIP for DUKH is listed as 26441C303.

When the callable date comes, does the company have a certain amount of time to either call it or not? (The reason I ask, is the brokerage data says DUKH is callable on 9/15/2020 while you said it has been callable since 2018. Just trying to understand in a little more depth.)
DUKH prospectus --- https://www.sec.gov/Archives/edgar/data ... z424b5.htm

At any time on or after January 15, 2018, we will have the right to redeem the Debentures, in whole or in part and from time to time, at a redemption price equal to 100% of the principal amount of the Debentures being redeemed plus accrued and unpaid interest on the Debentures being redeemed to, but excluding, the date of redemption. (page S-16)
I guess it all could be much worse. | They could be warming up my hearse.
rgs92
Posts: 2768
Joined: Mon Mar 02, 2009 8:00 pm

Re: Question About Corporate Bonds

Post by rgs92 »

I would think of transferring everything to Fidelity (into a regular individual brokerage account) and then you will see a formal description of each item.
Then you can ask (or just try online) to sell each holding and see a value of the proceeds of each sale.
And you can call them for info on each of the holdings for free.
This would help you get organized. Just avoid getting into any sort a management account with them. You can ask them about the details of any holding you have and they should not charge you anything for this.

I once had a whole set of individual corporate bonds in a Fidelity account and they assisted me in selling them and finding out their associated values and it was all pretty easy and quick.

Then you can just buy any security or index fund you want (like the Fidelity Zero-expense funds or their total bond market funds or any ETFs) for free.
That would be a nice way to simplify things.

You can also ask them about the taxable amount for each sale. At the end of the year, they will give you all the tax documents (the 1099s) with the taxable amounts. You can then just import all this into Turbo Tax and you are fine.

They will have the cost basis on each sale as zero probably.
Last edited by rgs92 on Wed Aug 19, 2020 5:26 pm, edited 1 time in total.
not4me
Posts: 893
Joined: Thu May 25, 2017 3:08 pm

Re: Question About Corporate Bonds

Post by not4me »

7eight9 wrote: Wed Aug 19, 2020 5:14 pm
ImUrHuckleberry wrote: Wed Aug 19, 2020 5:01 pm
not4me wrote: Wed Aug 19, 2020 4:42 pm So, just using Duke Power as an example (& somewhere you probably have CUSIPs to double check this...). In the "Stock / Options" list is a preferred series A. Tickers for preferreds can differ between lookups, but may be something like "DUK.A", or "DUK_PRA" etc. Looks like today it traded at $28.30 & almost 53K shares were traded. in the fixed income, there is an exchange traded debt that has ticker DUKH. It closed at $25.94 and just under 17k were traded. It's been callable since 2018 & isn't qualified (I didn't pull the prospectus to verify these). I suspect they both pay quarterly.
Yes, looks like you are correct. Thanks! The CUSIP for DUKH is listed as 26441C303.

When the callable date comes, does the company have a certain amount of time to either call it or not? (The reason I ask, is the brokerage data says DUKH is callable on 9/15/2020 while you said it has been callable since 2018. Just trying to understand in a little more depth.)
DUKH prospectus --- https://www.sec.gov/Archives/edgar/data ... z424b5.htm

At any time on or after January 15, 2018, we will have the right to redeem the Debentures, in whole or in part and from time to time, at a redemption price equal to 100% of the principal amount of the Debentures being redeemed plus accrued and unpaid interest on the Debentures being redeemed to, but excluding, the date of redemption. (page S-16)
7eight9 beat me to it.
Valuethinker
Posts: 41140
Joined: Fri May 11, 2007 11:07 am

Re: Question About Corporate Bonds

Post by Valuethinker »

ImUrHuckleberry wrote: Wed Aug 19, 2020 4:24 pm
not4me wrote: Wed Aug 19, 2020 3:43 pm I may have not looked at this as closely as others, but I have a different take. I sampled the list & didn't find a bond; they were all "baby bonds" or exchange traded debt (again, just a sampling). These will (in at least 1 case are already) be callable at $25, but currently are worth more than that. Since you recently inherited, if you wait until they are called you'll have a long term capital loss. That might not be bad depending on your tax situation, just thought I'd pass that along. (I didn't check, but my experience is that usually the dividend is not qualified. Not always, so you might want to check). I wouldn't expect it to be as likely these will be called as a bond. Different series can have difference characteristics, so check each

Edited to change: originally I used the term "preferred" & it is (likely) more correct to use "baby bonds". Without a cusip, I'm guessing a bit anyway. Apologies for being in too much a hurry before & using the term I had read in some of the posts.
Hmmm, I just assumed they were bonds and not preferred stocks because the broker listed them as fixed income. Here is the full list for one of the accounts, with a little more info:

Product Type Name Open Order Symbol
Stocks / Options ALABAMA POWER CO 5%-A Rate: 1.250% No ALP.Q
Stocks / Options AMERICAN ELECTRIC POWER CO No AEP
Stocks / Options AMERICAN INTERNATIONAL 5.85%-A Rate: 1.462% No AIG.A
Stocks / Options ATLAS CORP FIX FLT CM PFD I Rate: 2.000% No ATCO.I
Stocks / Options BANK OF AMERICA CORP 6%-GG Rate: 1.500% No BAC.B
Stocks / Options CAP ONE FINL CO 5.2% SER-G Rate: 1.300% No COF.G
Stocks / Options CAPITAL ONE FINANCIAL 5%-I PRF Rate: 1.250% No COF.I
Stocks / Options DIGITAL RLTY TST INC 5.20%SERL Rate: 1.300% No DLR.L
Stocks / Options DUKE ENERGY CORP 5.75%-A Rate: 1.438% No DUK.A
Stocks / Options FIFTH THIRD BANCORP 4.95% S-K Rate: 1.238% No FITBO
Stocks / Options JPMORGAN CHASE & CO 6.15% BB Rate: 1.537% No JPM.H
Stocks / Options METLIFE INC 5.62% NCUM PFD E Rate: 1.406% No MET.E
Stocks / Options MORGAN STANLEY 4.875% SER-L Rate: 1.219% No MS.L
Stocks / Options NORTHERN TRUST CORP 4.70% S-E Rate: 1.175% No NTRSO
Stocks / Options PUBLIC STORAGE 5.20%-W Rate: 1.300% No PSA.W
Stocks / Options SPIRE INC 5.90% SER-A Rate: 1.475% No SR.A
Stocks / Options TRITON INTL LTD 8.50% A Rate: 2.125% No TRTN.A
Stocks / Options VORNADO REALTY TR SER-L 5.40% Rate: 1.350% No VNO.L
Stocks / Options WELLS FARGO & CO 5.5% SER-X Rate: 1.375% No WFC.X
Stocks / Options WELLS FARGO & CO 5.7%-W Rate: 1.425% No WFC.W
Stocks / Options WELLS FARGO & COMPANY 5.625%-Y Rate: 1.406% No WFC.Y
Corporate Fixed Income AT&T INC 5.35% CPN: 5.350% Due : 11/1/2066 Callable at $25.000 on 11/1/2022 No TBB
Corporate Fixed Income AT&T INC 5.625% CPN: 5.625% Due : 8/1/2067 Callable at $25.000 on 8/1/2023 No TBC
Corporate Fixed Income DUKE ENERGY CORP CPN: 5.125% Due : 1/15/2073 Callable at $25.000 on 9/15/2020 No DUKH
Corporate Fixed Income ENTERGY ARKANSAS LLC 4.75% CPN: 4.750% Due : 6/1/2063 Callable at $25.000 on 9/15/2020 No EAE
Corporate Fixed Income PRUDENTIAL FINANCIAL INC 5.70% CPN: 5.700% Due : 3/15/2053 Callable at $25.000 on 9/15/2020 No PRH
Corporate Fixed Income QWEST CORP 6.125% 06/01/53 CPN: 6.125% Due : 6/1/2053 Callable at $25.000 on 9/15/2020 No CTY
Corporate Fixed Income SEMPRA ENERGY 5.750% CPN: 5.750% Due : 7/1/2079 Callable at $25.000 on 10/1/2024 No SREA
Corporate Fixed Income TELEPHONE & DATA SYS INC CPN: 6.625% Due : 3/31/2045 Callable at $25.000 on 9/15/2020 No TDI
Corporate Fixed Income THE SOUTHERN CO 6.25%-A CPN: 6.250% Due : 10/15/2075 Callable at $25.000 on 10/15/2020 No SOJA
Corporate Fixed Income WR BERKLEY CORP 5.7% CPN: 5.700% Due : 3/30/2058 Callable at $25.000 on 3/30/2023 No WRB.E
All the preference/ preferred shares look pretty blue chip. Once you get past the callable by dates on the bonds, those that are not called I would then sell (if the issuer does not have enough money to call those in and replace them by issuing lower coupon/ lower yield debt, then there's quite a bit of risk in them).

Although the preference shares will give you a relatively high income, they are probably all also trading at a premium to par value for that reason - a new buyer will get a low yield.

You basically have to view this as a portfolio of risky corporate bonds with no redemption date. How much would it hurt you if you lost money on these? If interest rates rose, for example, their values would fall from here.

Or another way of putting it: would you buy these again if someone gave you the equivalent cash value, now?

Generally I would say sell them - you are taking stock-specific risk which you will not be compensated for by the market.

Timing of sales may be influenced by US tax considerations (I am not US based).
User avatar
patrick013
Posts: 3014
Joined: Mon Jul 13, 2015 7:49 pm

Re: Question About Corporate Bonds

Post by patrick013 »

Most of these tickers are BBB or BBB- rated.

Most of them are trading at near their 52 week high over
their $25 call price.

As one analyst stated - sure you will get a dividend if
interested in dividends, but it will come with call risk.

Whether actually called or not only time will tell. The
large cap index should return a better return overall or a
common stock dividend index if some AA for dividends is desired.

A preferred stock index would provide even better risk/return
diversification for this asset class as a small tilt.

My vote is to sell them all at current high prices over call prices
and go to the 2-fund portfolio on the next market pullback.
Hopefully short term taxable gains would not be too high. If so
sell them after holding 1 year for lower tax.

Haven't seen such an interesting preferred stock portfolio in awhile BTW.
age in bonds, buy-and-hold, 10 year business cycle
Oregano
Posts: 132
Joined: Fri Nov 22, 2019 9:30 pm

Re: Question About Corporate Bonds

Post by Oregano »

ImUrHuckleberry wrote: Wed Aug 19, 2020 4:24 pm
not4me wrote: Wed Aug 19, 2020 3:43 pm I may have not looked at this as closely as others, but I have a different take. I sampled the list & didn't find a bond; they were all "baby bonds" or exchange traded debt (again, just a sampling). These will (in at least 1 case are already) be callable at $25, but currently are worth more than that. Since you recently inherited, if you wait until they are called you'll have a long term capital loss. That might not be bad depending on your tax situation, just thought I'd pass that along. (I didn't check, but my experience is that usually the dividend is not qualified. Not always, so you might want to check). I wouldn't expect it to be as likely these will be called as a bond. Different series can have difference characteristics, so check each

Edited to change: originally I used the term "preferred" & it is (likely) more correct to use "baby bonds". Without a cusip, I'm guessing a bit anyway. Apologies for being in too much a hurry before & using the term I had read in some of the posts.
Hmmm, I just assumed they were bonds and not preferred stocks because the broker listed them as fixed income. Here is the full list for one of the accounts, with a little more info:

Product Type Name Open Order Symbol
Stocks / Options ALABAMA POWER CO 5%-A Rate: 1.250% No ALP.Q
Stocks / Options AMERICAN ELECTRIC POWER CO No AEP
Stocks / Options AMERICAN INTERNATIONAL 5.85%-A Rate: 1.462% No AIG.A
Stocks / Options ATLAS CORP FIX FLT CM PFD I Rate: 2.000% No ATCO.I
Stocks / Options BANK OF AMERICA CORP 6%-GG Rate: 1.500% No BAC.B
Stocks / Options CAP ONE FINL CO 5.2% SER-G Rate: 1.300% No COF.G
Stocks / Options CAPITAL ONE FINANCIAL 5%-I PRF Rate: 1.250% No COF.I
Stocks / Options DIGITAL RLTY TST INC 5.20%SERL Rate: 1.300% No DLR.L
Stocks / Options DUKE ENERGY CORP 5.75%-A Rate: 1.438% No DUK.A
Stocks / Options FIFTH THIRD BANCORP 4.95% S-K Rate: 1.238% No FITBO
Stocks / Options JPMORGAN CHASE & CO 6.15% BB Rate: 1.537% No JPM.H
Stocks / Options METLIFE INC 5.62% NCUM PFD E Rate: 1.406% No MET.E
Stocks / Options MORGAN STANLEY 4.875% SER-L Rate: 1.219% No MS.L
Stocks / Options NORTHERN TRUST CORP 4.70% S-E Rate: 1.175% No NTRSO
Stocks / Options PUBLIC STORAGE 5.20%-W Rate: 1.300% No PSA.W
Stocks / Options SPIRE INC 5.90% SER-A Rate: 1.475% No SR.A
Stocks / Options TRITON INTL LTD 8.50% A Rate: 2.125% No TRTN.A
Stocks / Options VORNADO REALTY TR SER-L 5.40% Rate: 1.350% No VNO.L
Stocks / Options WELLS FARGO & CO 5.5% SER-X Rate: 1.375% No WFC.X
Stocks / Options WELLS FARGO & CO 5.7%-W Rate: 1.425% No WFC.W
Stocks / Options WELLS FARGO & COMPANY 5.625%-Y Rate: 1.406% No WFC.Y
Corporate Fixed Income AT&T INC 5.35% CPN: 5.350% Due : 11/1/2066 Callable at $25.000 on 11/1/2022 No TBB
Corporate Fixed Income AT&T INC 5.625% CPN: 5.625% Due : 8/1/2067 Callable at $25.000 on 8/1/2023 No TBC
Corporate Fixed Income DUKE ENERGY CORP CPN: 5.125% Due : 1/15/2073 Callable at $25.000 on 9/15/2020 No DUKH
Corporate Fixed Income ENTERGY ARKANSAS LLC 4.75% CPN: 4.750% Due : 6/1/2063 Callable at $25.000 on 9/15/2020 No EAE
Corporate Fixed Income PRUDENTIAL FINANCIAL INC 5.70% CPN: 5.700% Due : 3/15/2053 Callable at $25.000 on 9/15/2020 No PRH
Corporate Fixed Income QWEST CORP 6.125% 06/01/53 CPN: 6.125% Due : 6/1/2053 Callable at $25.000 on 9/15/2020 No CTY
Corporate Fixed Income SEMPRA ENERGY 5.750% CPN: 5.750% Due : 7/1/2079 Callable at $25.000 on 10/1/2024 No SREA
Corporate Fixed Income TELEPHONE & DATA SYS INC CPN: 6.625% Due : 3/31/2045 Callable at $25.000 on 9/15/2020 No TDI
Corporate Fixed Income THE SOUTHERN CO 6.25%-A CPN: 6.250% Due : 10/15/2075 Callable at $25.000 on 10/15/2020 No SOJA
Corporate Fixed Income WR BERKLEY CORP 5.7% CPN: 5.700% Due : 3/30/2058 Callable at $25.000 on 3/30/2023 No WRB.E
Some of these are bonds, some are preferred stocks, but the key point in pricing is that they are all exchange-traded (i.e., they trade just like stocks). So when the market is open, you can easily look up the bid and ask quotes. If the bid/ask spread is fairly small, that is telling you that the position is fairly liquid and if you want to get rid of the holding, put in a limit order at the bid and depending on your order size you can probably sell fairly easily. If the bid/ask spread is large, the issue is less liquid. You can still try to sell it with a limit order, but it will be difficult to figure out what price to try to sell it at or whether your order will ever get filled. Maybe start with your limit order in the middle of the bid/ask and then slowly reduce it over time if it is not getting filled.
Topic Author
ImUrHuckleberry
Posts: 491
Joined: Sat Apr 15, 2017 7:44 am

Re: Question About Corporate Bonds

Post by ImUrHuckleberry »

Thanks all. The preferred stocks and baby bonds (exchange traded debt) I listed are all in an after tax brokerage account. We also inherited an IRA filled with a bunch of similar investments. It appears that we do not have to take mandatory distributions annually from the IRA, but we do have to take it all out by 12/31/3030.

I think I have a plan:

* Sell everything in the brokerage account and invest in index funds consistent with our normal investment plan
* Sell the two regular stocks and anything rated below investment grade in the IRA, and keep the rest (assuming they don't get called - anything that gets called will be invested per our normal investment plan)

I'm considering counting both the preferred stocks and the baby bonds as part of our fixed allocation. (It will account for roughly about 20% of our total fixed allocation.) This will make our fixed allocation more risky, but will also (I think) give us better yield than we're able to get from our current fixed investments. Does that seem like a reasonable plan?
Last edited by ImUrHuckleberry on Sat Aug 22, 2020 1:19 pm, edited 1 time in total.
User avatar
patrick013
Posts: 3014
Joined: Mon Jul 13, 2015 7:49 pm

Re: Question About Corporate Bonds

Post by patrick013 »

ImUrHuckleberry wrote: Sat Aug 22, 2020 11:28 am Does that seem like a reasonable plan?
Looking at funds that invest in preferreds they include about 1/3 BB rated
securities in the funds. Like High Yield bond funds.

If you kept only BBB and higher preferreds you'd have a better portfolio than
they do ratings wise, in taxable and IRA.

Your corporate income AA would be aptly covered. BBB risk but covered.

Everything I looked at on Schwab said those are preferreds BTW.
age in bonds, buy-and-hold, 10 year business cycle
Topic Author
ImUrHuckleberry
Posts: 491
Joined: Sat Apr 15, 2017 7:44 am

Re: Question About Corporate Bonds

Post by ImUrHuckleberry »

So after careful consideration, we ended up just liquidating all of these and investing in our normal investments. I just didn't think it was worth holding the individual investments, especially after looking back at how hard they got walloped in March.
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