Agency bond question

[hoops777]

Schwab has a 5 year agency bond,FHB, yielding 5.25 %.

I am assuming there are no gotcha’s with these agency bonds other than being called.

I was going to buy a 6 month treasury yielding about 4.8.

I would be very happy to keep the agency bond for 5 years but realize it will probably be called in July at its first call date.

Any reason I should not buy the agency bond with the higher yield over the Treasury assuming they will both be done in 6 months ?

It is in my Roth.

Thanks

[prozario01]

That sounds bit high, as I was looking at some today well on Merrill Edge. Could no find anything better than 4.5% for 3 to 5 year range. I usually look at Yield to Worst - that's basically if you get called what is your worst-case return.

Is that coupon rate or actual yield (or yield to worst). Also, check the credit rating. Sounds a bit too high at 5.25% for 5 years.

One of the problems i see with Agency bond - lot of them has large minimum purchase requirement like $50K.

[hoops777]

That sounds bit high, as I was looking at some today well on Merrill Edge. Could no find anything better than 4.5% for 3 to 5 year range. I usually look at Yield to Worst - that's basically if you get called what is your worst-case return.

Is that coupon rate or actual yield (or yield to worst). Also, check the credit rating. Sounds a bit too high at 5.25% for 5 years.

One of the problems i see with Agency bond - lot of them has large minimum purchase requirement like $50K.

The credit rating was very high, and I believe the yield to worse was also 5.25.

[prozario01]

That sounds bit high, as I was looking at some today well on Merrill Edge. Could no find anything better than 4.5% for 3 to 5 year range. I usually look at Yield to Worst - that's basically if you get called what is your worst-case return.

Is that coupon rate or actual yield (or yield to worst). Also, check the credit rating. Sounds a bit too high at 5.25% for 5 years.

One of the problems i see with Agency bond - lot of them has large minimum purchase requirement like $50K.

The credit rating was very high, and I believe the yield to worse was also 5.25.

I was looking for something today - at that rate, i would definitely get it. Check the other agency bonds around the same maturity - see if others are around that rate or not. Maybe my broker, they don't have that inventory - but i could not find anything near 5% for the Agency bond (it was around 4.5%).

[hoops777]

It was there a couple hours ago and I bought it.
I just looked and there is nothing close to that yield now.

[prozario01]

Good move if you can get 5 years at 5.25%

[MikeG62]

Good move if you can get 5 years at 5.25%

These are typically callable. OP said this one was callable in about 12 months.

I bought an Agency note in early Dec = 5.95% 10-year term callable beginning in 12-months. I wish it would remain outstanding for 10-years, but have no illusions that it will. I expect I will be called out of that position by the end of this year. Still 5.95% for 12-months state tax free is fantastic for as long as it lasts.