Fixed Income ideas

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I will use this thread to discuss few fixed income ideas. FED is more or less done with raising rates now. While we don’t know what the future holds, there is a higher probability the rates could go down next year.

If the rates goes down then the fixed income securities could appreciate in value. Together with interest/ dividend they could provide 10% return.

I have long bought and sold successfully bank preferred’ s like WFC-PR-L and REIT preferred’ s. I am moving away from REIT preferred’s because in a takeover they are “waldonized”, meaning, the buying company can chose not to pay the dividend or create uncertainty and drive the prices down and buy them cheaply (erstwhile PSB preferred’s) etc.

In any case, for now I have recently bought WFC-L early Oct around 1075 and they are already up over 5%, the ex-date for the dividend is 11/29.

During the regional bank crisis I also bought a tiny amount of ZIONL.

Will discuss more ideas.

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ALL-B, this is exchange listed debt, issued by the insurance company Allstate. The interest rate is tied to LIBOR, i.e., LIBOR+3.165%. Currently the LIBOR is 4.75%!

Of course they can redeem this debt any time but less likely Unfortunately this will not appreciate when the interest rate falls, since the rate adjusts. This allows you to earn market rate + a fixed rate and I expect that it will hold its value. The below graph shows the price performance. Please note: before Jan 2023 it had a fixed rate, so there is that dynamics.

Unlike preferred’s this is sub-ordinated debt and has better protection in a takeover/ merger.

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Here is a tweet from Jim Bianco, a macro strategist. I am not predicting what the interest rates will do, but we are much closer to interest rate peak now, and I am not expecting Volcker era like double digit interest rates.

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It is now 10% up, mainly because the interest rates have moved down sharply. I didn’t get the absolute bottom only off by 2 weeks :slight_smile: I am going to sit tight and see how far the yields fall and may take profit and wait for better entry point. OTOH, you may want to leave these position and not trade and get into capital gains, etc. In any case, the interest rates have declined sharply and it could stall or even reverse a bit.

Any raise in interest rates is an opportunity to buy.