High Yield Debt
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Are you buying, selling, or holding high-yield debt (funds, individual bonds, etf’s)? Some of the yields have been attractive, but I have heard some concerning commentary about some of it.
I think that ship sailed the past 6 months. I made some money for my clients in high-yield stuff, now I am starting to back off. However, I will still continue to hold for clients that need high current income, as there are not a lot of great alternatives right now. For the risk profile, and the upside potential, quality dividend stocks might be a better choice right now.
Yeah, I agree with B24. I was buying in Feb-April. Holding now unless I need to increase income in portfolios, then I’ll buy.
Just sold all high yield today - the past few months were a nice run; wouldn’t be a buyer here form a purely probability perspective. I.E. - it’s more probable to drop than rise at least in the next 4-16 weeks.
Here’s the general rule I use:
Buy high yield corporate when spreads are above 600 BP's in a recovery scenario. Buy high yield muni's when spreads increase above 250 BP's, also in a recovery scenario. Sell HYC when spreads narrow to 450 BP's or lower, sell HYM when spreads narrow to 200 BP's or less. Last time I checked, HYC spreads are around 900 BP's and HYM spreads are around 400 BP's. Both are still screaming buys until the above criteria is met. Selling now is hugely premature.[quote=rankstocks]Here’s the general rule I use:
Buy high yield corporate when spreads are above 600 BP's in a recovery scenario. Buy high yield muni's when spreads increase above 250 BP's, also in a recovery scenario. Sell HYC when spreads narrow to 450 BP's or lower, sell HYM when spreads narrow to 200 BP's or less. Last time I checked, HYC spreads are around 900 BP's and HYM spreads are around 400 BP's. Both are still screaming buys until the above criteria is met. Selling now is hugely premature.[/quote] Great post![quote=BondGuy][quote=rankstocks]Here’s the general rule I use:
Buy high yield corporate when spreads are above 600 BP's in a recovery scenario. Buy high yield muni's when spreads increase above 250 BP's, also in a recovery scenario. Sell HYC when spreads narrow to 450 BP's or lower, sell HYM when spreads narrow to 200 BP's or less. Last time I checked, HYC spreads are around 900 BP's and HYM spreads are around 400 BP's. Both are still screaming buys until the above criteria is met. Selling now is hugely premature.[/quote] Great post![/quote] Bond guy and/or Rankstocks....are you currently taking profits on some of these longer term bonds and swapping them for the BABs which seem to have a better rate, shorter duration and better rating...i've been calling on them alot lately and it seems too easy?!? I understand they have to pay taxes on the gain in an NQ account....but i'm going from 2036 maturity at 5.75% A rated corporate to a 7.45% coupon @ 105 AA BAB mautring 2019.Like ranks, i’m not a seller of high yield at this point. I am a big buyer of BABs which to me seem like a slam dunk.
However, just because i'm not doing it doesn't mean that you shouldn't be doing it. You can never go broke taking a profit[quote=Hey Kool-Aid][quote=BondGuy][quote=rankstocks]Here’s the general rule I use:
Buy high yield corporate when spreads are above 600 BP's in a recovery scenario. Buy high yield muni's when spreads increase above 250 BP's, also in a recovery scenario. Sell HYC when spreads narrow to 450 BP's or lower, sell HYM when spreads narrow to 200 BP's or less. Last time I checked, HYC spreads are around 900 BP's and HYM spreads are around 400 BP's. Both are still screaming buys until the above criteria is met. Selling now is hugely premature.[/quote] Great post![/quote] Bond guy and/or Rankstocks....are you currently taking profits on some of these longer term bonds and swapping them for the BABs which seem to have a better rate, shorter duration and better rating...i've been calling on them alot lately and it seems too easy?!? I understand they have to pay taxes on the gain in an NQ account....but i'm going from 2036 maturity at 5.75% A rated corporate to a 7.45% coupon @ 105 AA BAB mautring 2019.[/quote] Sounds like a good thing you are doing for your clients, shortening maturities in half and increasing credit rating....[quote=noggin][quote=Hey Kool-Aid][quote=BondGuy][quote=rankstocks]Here’s the general rule I use:
Buy high yield corporate when spreads are above 600 BP's in a recovery scenario. Buy high yield muni's when spreads increase above 250 BP's, also in a recovery scenario. Sell HYC when spreads narrow to 450 BP's or lower, sell HYM when spreads narrow to 200 BP's or less. Last time I checked, HYC spreads are around 900 BP's and HYM spreads are around 400 BP's. Both are still screaming buys until the above criteria is met. Selling now is hugely premature.[/quote] Great post![/quote] Bond guy and/or Rankstocks....are you currently taking profits on some of these longer term bonds and swapping them for the BABs which seem to have a better rate, shorter duration and better rating...i've been calling on them alot lately and it seems too easy?!? I understand they have to pay taxes on the gain in an NQ account....but i'm going from 2036 maturity at 5.75% A rated corporate to a 7.45% coupon @ 105 AA BAB mautring 2019.[/quote] I think so too...and haven't had any pushback from Compliance (not that I expected any). I'm not selling the high yield, just the bonds I bought over the past 1.5 years that have appreciated and replacing them with the BABs that have better rates, term etc.. Sounds like a good thing you are doing for your clients, shortening maturities in half and increasing credit rating.... [/quote]