Purchased a corp bond off secondary market. Two weeks later it's still not delivered. Xaction just gets cancelled?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
LookinAround
Posts: 1078
Joined: Tue Mar 27, 2018 5:41 am

Purchased a corp bond off secondary market. Two weeks later it's still not delivered. Xaction just gets cancelled?

Post by LookinAround »

On 1/21/2025 I bought a corporate bond off the secondary market for my Vanguard tIRA. Today, Vanguard sent a “Fixed Income fail to receive notice” informing me that all or a portion of the bond hasn’t been received into my account. It went on to say if Vanguard doesn’t receive it by 2/6/2025 they’ll cancel my order and the purchase amount will be credited back to my account.

A Vanguard rep explained the dealer didn’t deliver my purchased bond to Vanguard. Further, as the money was withdrawn from my account I won’t earn interest on the funds between date of withdrawal and the date it's re-deposited. :annoyed

My first foray into buying corporate bonds off the secondary market. Does this happen often? Does it happen any more often at Vanguard than Schwab or Fidelity? Buying a bond off the secondary market doesn't mean I really bought it? Is the true for CDs, Treasuries, etc. as well? Worse yet, not only do I not get the product and yield I thought I bought, someone else gets the float off my funds???
Last edited by LookinAround on Thu Feb 06, 2025 2:47 pm, edited 1 time in total.
Weathering
Posts: 973
Joined: Sun Oct 15, 2017 4:20 pm

Re: Purchased a corp bond off secondary market. Two weeks later it's till not delivered. Xaction just gets cancelled?

Post by Weathering »

1. It happens about 1 in every 100 secondary market bond purchases. Though I've only had it happen (several times) at Vanguard (never at Fidelity, but I have found Vanguard to have a wider offering of secondary market corporate bonds so there are pluses and minuses to each)
2. It gets worse. If you look at TRACE data it will most likely show the bonds you purchased were transferred from one bond broker to another enroute to you. However, one of the bond brokers in the chain decided to keep the bonds. So they aren't with the original seller and they aren't with you. The middle-man walked away with the cheese! Sometimes that middleman even sold them a day after my purchase for a higher price.

When this has happened to me it was usually a very good price for that bond - turned out to be too good to be true (not because it wasn't available at the price but because it was "stolen" during the purchase process).

Post the cusip number and there will be people here who can show you your attempted purchase and where the bonds ended up.
MadHungarian
Posts: 585
Joined: Tue Jan 02, 2018 3:53 pm

Re: Purchased a corp bond off secondary market. Two weeks later it's till not delivered. Xaction just gets cancelled?

Post by MadHungarian »

Fascinating. So the corp bond world is a little more wild-west than the Treasuries world, i guess? It does sound a little like something out of the Predator's Ball or Liar's Poker.
Last edited by MadHungarian on Mon Feb 03, 2025 4:03 pm, edited 1 time in total.
Valuethinker
Posts: 51478
Joined: Fri May 11, 2007 11:07 am

Re: Purchased a corp bond off secondary market. Two weeks later it's till not delivered. Xaction just gets cancelled?

Post by Valuethinker »

MadHungarian wrote: Mon Feb 03, 2025 3:20 pm Fascinating. So the corp bond world is a little more wild-west than the Treasuries world, i guess? It does sound like a little like something out of the Predator's Ball or Liar's Poker.
Since those are books about bond markets (albeit in the 1980s) should we be surprised?

Bonds as I understand it, are all, "Over The Counter" so perhaps some of the market rules don't apply. And since retail investors are much less present in the (direct holdings as opposed to funds) bond market, then perhaps there's less reason to keep a level playing field?
Valuethinker
Posts: 51478
Joined: Fri May 11, 2007 11:07 am

Re: Purchased a corp bond off secondary market. Two weeks later it's till not delivered. Xaction just gets cancelled?

Post by Valuethinker »

MadHungarian wrote: Mon Feb 03, 2025 3:20 pm Fascinating. So the corp bond world is a little more wild-west than the Treasuries world, i guess? It does sound like a little like something out of the Predator's Ball or Liar's Poker.
Since those are books about bond markets (albeit in the 1980s) should we be surprised?

Bonds as I understand it, are all, "Over The Counter" so perhaps some of the market rules don't apply. And since retail investors are much less present in the (direct holdings as opposed to funds) bond market, then perhaps there's less reason to keep a level playing field?
lazyday
Posts: 3897
Joined: Wed Mar 14, 2007 10:27 pm

Re: Purchased a corp bond off secondary market. Two weeks later it's till not delivered. Xaction just gets cancelled?

Post by lazyday »

Weathering wrote: Mon Feb 03, 2025 1:33 pm 2. It gets worse. If you look at TRACE data it will most likely show the bonds you purchased were transferred from one bond broker to another enroute to you. However, one of the bond brokers in the chain decided to keep the bonds. So they aren't with the original seller and they aren't with you. The middle-man walked away with the cheese!
Could they change their mind? Buy the bond on Jan 21, then if company earnings are reported on Feb 4 and are surprisingly terrible, “Oh, here’s that bond your customer wanted!” at the original price?
Topic Author
LookinAround
Posts: 1078
Joined: Tue Mar 27, 2018 5:41 am

Re: Purchased a corp bond off secondary market. Two weeks later it's till not delivered. Xaction just gets cancelled?

Post by LookinAround »

Weathering wrote: Mon Feb 03, 2025 1:33 pm 1. It happens about 1 in every 100 secondary market bond purchases. Though I've only had it happen (several times) at Vanguard (never at Fidelity, but I have found Vanguard to have a wider offering of secondary market corporate bonds so there are pluses and minuses to each)
2. It gets worse. If you look at TRACE data it will most likely show the bonds you purchased were transferred from one bond broker to another enroute to you. However, one of the bond brokers in the chain decided to keep the bonds. So they aren't with the original seller and they aren't with you. The middle-man walked away with the cheese! Sometimes that middleman even sold them a day after my purchase for a higher price.

When this has happened to me it was usually a very good price for that bond - turned out to be too good to be true (not because it wasn't available at the price but because it was "stolen" during the purchase process).

Post the cusip number and there will be people here who can show you your attempted purchase and where the bonds ended up.
Thanks for the info. btw CUSIP is 254687DR4

Disappointing to learn you can put in a bid for a corp bond, it's (supposedly) accepted as funds are withdrawn from your trading account only to learn two weeks later your SOL: your trade never realized AND, to make it worse, the exercise in futility cost me $145! (I figure loss of simple interest from my settlement account, $100K @4.28% for 12 days.) So It cost me $145 while someone else has use of my money.

A lesson learned :annoyed
Post Reply