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Old 07-16-2022, 12:06 AM   #1
RiverRat1
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Default Tax free school bonds

I need to hear from people who were investing in the 80's.

Looks like tax free school bonds are around 5% so getting up there compared to the previous 10 years.

At what point will people start selling stocks and move more into bonds? How high will these individual bonds go if the FED raises rates as expected in 2022? 6.5-7%

I wouldn't mind being in a few long term bonds if they paid 7% If they got higher than that it would be hard to not buy a lot versus stay in markets.

Curious what TBHers think and may be planning.
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Old 07-16-2022, 12:33 PM   #2
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The higher your tax bracket the more compelling they are! Are you wanting to buy specific bonds or into a muni fund? I wouldn't buy individual bonds unless I planned to hold through maturity. You can get hammered selling while rates go up.
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Old 07-16-2022, 01:17 PM   #3
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I'm thinking individual bonds and I'd hold them. I like the 17 year ones.

Just need to time the top in interest rates

I want to put aside like 20% of portfolio and scale into these bonds once I feel they are high. I seriously doubt the FED will pivot from raising like crazy to lowering rates. Not unless something very drastic happens but there would still be time to buy.

I'm just curious as to guesses on how high they may go over the next 6-24 months. I'm thinking 7-8% but that's based off studying the 80's not investing through it.
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Old 07-16-2022, 06:55 PM   #4
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You don't have to back to the 80s. See chart #4 for 2008 and 2009. Notice the roller coaster of the charts?!

https://www.munibondadvisor.com/market.htm

Will current/next recession be as bad? Who knows.
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Old 07-27-2022, 04:52 PM   #5
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So now the FED raised another 3/4 of a point.

What will tax free bonds be paying once these last few rate hikes get baked in? How are bond rates calculated?
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Old 07-27-2022, 08:11 PM   #6
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indexed to the 10 year treasury.
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Old 07-27-2022, 08:42 PM   #7
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Hold your horses. In a few years we will see 1980s type interest rates. Rates get above 7% people will consider moving to bonds. 10%+ you will see a mass flood into bonds. Question is, at those rates, what will the tax rate become. Our politicians have really screwed things up, and the voters allowed it.
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Old 07-27-2022, 08:47 PM   #8
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The downside is if interest rates drop then you can count on the bonds being called at the first opportunity. Then you have to find a new home for the cash.
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Old 07-27-2022, 09:00 PM   #9
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If you want tax exempt paper look into purchasing a city meter system, fire truck, police units etc. I can sell you some all day. All of those are tax backed in TX and firm term.
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Old 07-27-2022, 09:29 PM   #10
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Right now there seems to be a pretty good argument for bonds. Especially with the financial future looking pretty rocky, it would be nice to have a consistent payment every few months from the coupons
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Old 09-21-2022, 02:38 PM   #11
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So FED just raised another 3/4 of a point. And it looks like they will do another 3/4 in November.

March 25 basis point raise
May 50?
June 75
July 75
Sept 75

So Bonds were paying 3-3.5% before they raised 3% over the last 6 months.

Will bonds start to play catch up soon? I saw they were nearing 5%.
Seems like after they raise in November and bonds "catch up" we could start seeing bonds as high as 7% No?

Would be nice to put savings to work without having to be in the markets.
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Old 09-21-2022, 04:10 PM   #12
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Your yield target is up to you. But we are in the first chapter of QT. The fed has a $9T balance sheet. It has to unwind some this and should drive yields up. It is going to be bumpy for sure.
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Old 09-21-2022, 04:21 PM   #13
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Are school bonds backed by the fed or can a school district default?
I know in January they plan to shut down the power plant and coal mine here. It will bankrupt the school district
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Old 09-21-2022, 10:22 PM   #14
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Quote:
Originally Posted by TeamAmerica View Post
Your yield target is up to you. But we are in the first chapter of QT. The fed has a $9T balance sheet. It has to unwind some this and should drive yields up. It is going to be bumpy for sure.
I'm just trying to get a good range of what yields may end up going to. Once they hit the lower end of the range I plan to start slowly buying. The higher they get the more I'll buy.

I'm wildly guessing they should hit 6% at the very least and 9% will be the highest.
Not too worried about buying at the top because those may be bought back the soonest.
Not sure why no FA's or anyone can predict, at least a little bit, future bond yields.

Quote:
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Are school bonds backed by the fed or can a school district default?
I know in January they plan to shut down the power plant and coal mine here. It will bankrupt the school district
Good question.
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Old 09-21-2022, 10:58 PM   #15
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Quote:
Originally Posted by Buff View Post
Are school bonds backed by the fed or can a school district default?
I know in January they plan to shut down the power plant and coal mine here. It will bankrupt the school district

Marty, school bonds are not backed by the Federal government. Yes, schools can default, but some school bonds in Texas may be backed/guaranteed by the Texas Permanent School Fund, and one can consider those safe.
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Old 09-22-2022, 10:33 AM   #16
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My only exposure is thru a vanguard fund (VWAHX) . Currently yielding 3.2% (4% on a 20% marginal tax rate). I'll keep my diversity and liquidity over chasing another few % yield.
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Old 10-21-2022, 03:54 PM   #17
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Looks like several 5% AA rated tax free bonds are available now.

I'm in a hold pattern trying to start buying at 5.5%
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Old 10-21-2022, 05:04 PM   #18
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Default Muni bonds

RiverRat, you can also purchase several Texas bonds that are fully insured. Several municipal utility district issuances in the Houston and Austin areas are like this. They of course yield a little less but combining a good rating with insurance is pretty dang safe.
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Old 10-24-2022, 04:17 PM   #19
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Just saw a 12 month CD was paying 4.4%

Strange a 1 year CD is 4.4% but 20-30 year bond is only 5%
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Old 10-24-2022, 05:00 PM   #20
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I've seen some 3 month CD rates in mid-high 3's too. Lots of flexibility there.
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Old 10-24-2022, 07:56 PM   #21
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Quote:
Originally Posted by RiverRat1 View Post
Looks like several 5% AA rated tax free bonds are available now.

I'm in a hold pattern trying to start buying at 5.5%
5% priced at Par?
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Old 10-24-2022, 08:04 PM   #22
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Quote:
Originally Posted by RiverRat1 View Post
Just saw a 12 month CD was paying 4.4%

Strange a 1 year CD is 4.4% but 20-30 year bond is only 5%
Really!
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Old 10-24-2022, 09:31 PM   #23
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Where? 12 month cd 4.4.
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Old 10-24-2022, 11:40 PM   #24
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Quote:
Originally Posted by JeffJ View Post
5% priced at Par?
I believe so.

Quote:
Originally Posted by brokeno View Post
Where? 12 month cd 4.4.
My financial guy told me.

Google shows a few around 4%
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Old 10-24-2022, 11:50 PM   #25
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Seems like a decent time to build a cd ladder
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Old 10-25-2022, 10:21 AM   #26
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Quote:
Originally Posted by brokeno View Post
Where? 12 month cd 4.4.
You have to buy these thru a broker. Most retail brokerages should have the option. I use schwab and they have several options.
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