Does anyone know about what percentage of these bonds are callable? I know we see that as a huge disadvantage of non-treasury LT-bonds, above and beyond the default risk they possess.
This is something that I'm really curious about.
Thanks in advance for any input.
What % of LT Muni/Corporate Bonds Are Callable??
Moderator: Global Moderator
What % of LT Muni/Corporate Bonds Are Callable??
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: What % of LT Muni/Corporate Bonds Are Callable??
There were some old Treasury bonds issued back in the 80s that had call privileges, I believe. Those have all been called, at this point, though and I don't believe any others are outstanding.Clive wrote: I may be wrong, but US T's are callable as well upon announcing the intent to call four months before a potential call date. I thought some 30 year T's were called in 2003 or 2004.
If a security has call privileges on it, it'll be marked as such. That's even one of the search criteria you can use on Fidelity's bond search.
Anyhow, any US Treasury bond you've got right now is not callable.
Moda, as to your original question, I'm not sure of the answer. It sounds to me like you're doing some sort of interesting thought experiment... looking forward to seeing the results.
Re: What % of LT Muni/Corporate Bonds Are Callable??
LW,
I tend to read "most" or "many" in articles I read about callable bonds and how much they make up a corporate/muni fund. I'm surprised, with all the information that the average mutual fund gives you, that this isn't one of the most disclosed pieces of information.
Especially on the long-end of the curve, this is extremely important. Sorry, but if I can buy a 30 year treasury for 4.2% vs a callable mortgage at 4.5%, this is an easy decision.
It seems to me that unless you include SS and other private annuities, the market is pretty lacking in true income protection... even if it is in the form of a non-callable muni or AAA corporate bond fund.
I think this might be another case for LTT's...not only are they from the borrower of last-resort, but they offer terms that seem to fill an under-served market need. The thing is, most CFO's, Homeowners and Municipal Treasurers would never lock themselves or their company/municipality into an interest rate for 30 years that they couldn't refi their way out of. This creates a bond market over-populated by "tainted" bonds (IMO, these "heads I win tails you lose" bonds are fundamentally flawed).
I have now split bonds into two categories... short-term (and cash, which is kind of like a bond with a second-by-second maturity date) offer principal protection. Long-term bonds may lose value, but they offer income protection... aka, 4.2% fixed for 30 years. Even if rates explode, you're still getting $42 per year on that $1,000 bond you bought.
Thinking as a retiree trying to get decent income in today's world, that steady stream of income could look extremely attractive if/when dividends are being cut and corporations/homeowners/municipalities are either defaulting or refinancing into low rates.
I tend to read "most" or "many" in articles I read about callable bonds and how much they make up a corporate/muni fund. I'm surprised, with all the information that the average mutual fund gives you, that this isn't one of the most disclosed pieces of information.
Especially on the long-end of the curve, this is extremely important. Sorry, but if I can buy a 30 year treasury for 4.2% vs a callable mortgage at 4.5%, this is an easy decision.
It seems to me that unless you include SS and other private annuities, the market is pretty lacking in true income protection... even if it is in the form of a non-callable muni or AAA corporate bond fund.
I think this might be another case for LTT's...not only are they from the borrower of last-resort, but they offer terms that seem to fill an under-served market need. The thing is, most CFO's, Homeowners and Municipal Treasurers would never lock themselves or their company/municipality into an interest rate for 30 years that they couldn't refi their way out of. This creates a bond market over-populated by "tainted" bonds (IMO, these "heads I win tails you lose" bonds are fundamentally flawed).
I have now split bonds into two categories... short-term (and cash, which is kind of like a bond with a second-by-second maturity date) offer principal protection. Long-term bonds may lose value, but they offer income protection... aka, 4.2% fixed for 30 years. Even if rates explode, you're still getting $42 per year on that $1,000 bond you bought.
Thinking as a retiree trying to get decent income in today's world, that steady stream of income could look extremely attractive if/when dividends are being cut and corporations/homeowners/municipalities are either defaulting or refinancing into low rates.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine