Most of the securities that I was thinking about buying this morning jumped in price. There were two bond ETFs that were sinking so I did a nibble on both of them to add to existing positions. The first is SPDR Lehman Municipal Bond (TFI). SPDR Lehman Municipal Bond ETF- TFI - SPDR Fixed Income ETFs - Fund Detail It closed last Friday with a NAV of 19.85. It fell this morning to 18.5 where I added to it. It pays dividends monthly. About 96% of the securities are rated either AAA (41%) or AA (54.6%) and TFI has a tax equivalent yield of 7.28% according the web site. I reviewed all the applicable material before making any investment and checked it again before adding to my existing position. The sponsor for this ETF, and the next one I am going to mention, is State Street Global Advisors (SSGA).
I also added to my existing position in SPDR International Bond (BWX), with an odd lot limit order being hit early this morning at 47.35. SPDR Lehman International Treasury Bond ETF (BWX) - State Street Global Advisors - Fund Detail Something odd is happening on this one for the past few days. The NAV for this ETF was 50.87 on 10/10/08 so it was already selling at a significant discount before this morning and even more today with the foreign currencies rising against the dollar this morning (FXE, FXA, FXC, FXY). Portfolio durations is currently 6.15 years, and most of the securities are from developed nations with a large concentration of around 25% in Japan. This is part of my overall bond strategy which includes some allocation to bonds issued by foreign governments recognizing that the value of this ETF will go down in the event the dollar continues to rise against the basket of these foreign currencies which has been the case for several months now after a multi-year decline. The yen has risen against the dollar recently, however. Being priced in foreign currencies, the bonds contained in BWX will of course go up and down just on currency swings and will be effected by other factors common to all bonds including inflation and credit risks.
In full disclosure, I own shares of BWX and TFI and will continue to buy additional shares at or below the current price, or even slightly above. These purchases today are part of a carefully pre-designed allocation strategy to the bond market, unique to my investing profile, net worth, age and risk tolerance, which includes individual bonds, bond mutual funds, bonds in Trust Certificate form, other bond ETFs including TIP and WIP and closed end investment companies investing in bonds. This is not a recommendation to buy or to sell. Trade at your own risk, and perform research about this securities, fully comprehending all factors including alternative ETFs and expense ratios. Consult with your financial advisor prior to making any purchase. In this blog, I am merely describing my reasons for purchasing this security and the potential pitfalls that I identified prior to purchase. This security may not be suitable for others based on their unique financial position and risk profile. THE PROSPECTUS ON and other information on these two ETFs can be found at the above referenced web sites.