Friday, January 13, 2017

Exchange Traded Baby Bonds

The purpose of this post is simply to aggregate trading snapshots and to provide in one place links to discussions about exchange traded bonds that were originally published at SeekingAlpha.  

This will help me find material more easily that may be pertinent to future discussions here. 

The trading snapshots will appear at the end of this post. 

I am not going to reproduce here the snapshots found at Baby Bonds - South Gent | Seeking Alpha

That post includes snapshots for trades starting in 2009 through 11/30/16. 

Total Net Realized Gain as of 11/30/16$8,333.38 

Snapshots of sell transactions after 11/30/16 can be found at the end of this post.  

Profits As of 12/19/17: $11,515.53

Most of my individual bond trades are in the bond market where the par value is $1,000 per bond. Exchange traded bonds are easier for most investors to buy and sell since they are traded like stocks on the stock exchanges.  Par value is generally $25 per bond, hence the name "baby bonds". Exchange traded bonds trade flat which simply means that the buyer does not have to pay accrued interest to the seller. Whoever owns the bond on the ex-interest date receives the entire interest payment for the covered period.  

Exchange traded baby bonds is just one category of EXCHANGE TRADED BONDS.

My Baby Bond category does not include the exchange traded bond categories that are labeled principal protected notes, European hybrids, trust preferred, and trust certificates. Some investors may refer to those categories as baby bonds since they are traded on the stock exchange and generally have $25 par values compared to $1,000 par values for bonds traded in the bond market.
Baby bonds come in three basic flavors: junior, unsecured senior and secured senior.
My definition of a Baby Bond requires the following elements to be present: (1) the instrument pays interest rather than qualified dividends (which excludes the European hybrids); (2) the coupon payments are not governed in whole or in part by the performance of an stock or commodity index or the price of gold; (3) par value is $25 or less; (4) the instrument is traded on the stock exchange; and (5) the investor acquires direct ownership of the bond as distinguished from an indirect beneficial interest acquired through a trust security (which excludes trust preferred and trust certificates).
The following links do not include discussions appearing in my SA comment blogs but only to discussions found in SA Instablogs. 

Links to Discussions of Baby Bond discussions at SeekingAlpha: 

Item # 1. Bought Back the Synthetic Floater GJS at $18.4: Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 11/11/15 - South Gent | Seeking Alpha (contains snapshots of prior trading profits and links to other post discussions)
Item # 4. Sold 100 of 200 GYB at $21.9Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 7/13/16 - South Gent | Seeking Alpha (Trading Profits as of 7/13/16 = $1,531.32)
5. Added 50 GYB at $19.99Update For Exchange Traded Bonds And Preferred Stocks Basket Strategy As 6/3/16-South Gent | Seeking Alpha {Trading Profits as of 6/3/16 =$1,382.72/Snapshots of my GYB trading gains can be found in my Gateway Post for and in Item # 3 Tiptoed Back into the Exchange Traded Synthetic Floater GYB (2/21/15 Post)}

3. PARED GYC: Sold 50 at $24.01-Taxable AccountUpdate For Exchange Traded Bonds And Preferred Stock Basket Strategy As Of 8/16/16 - South Gent | Seeking Alpha (trading profits as of 8/16/16 = +$676.61)

Item # 3. Transferred 50 shares of KTN from the Regular IRA to the ROTH IRA and Later Sold the Shares at $32.15 ($25 par value): Update For Bond And Equity Preferred Stock Basket Strategy As Of 7/31/15 - South Gent | Seeking Alpha

Item # 3. Swapped Again NGHCP for More NGHCZ-Sold 50 NGHCP at $25.07 and Bought 50 NGHCZ at $23.19Update For Exchange Traded Bonds And Preferred Stock Basket Strategy As Of 1/22/16 - South Gent | Seeking Alpha
Item # 2. Paired Trade: Bought 50 NGHCZ at $23.75 (a Roth IRA account) and Another 50 at $23.2 (a new Taxable Account)-and Sold 50 NGHCP at $25 (a Roth IRA account)}: Update For Bond And Preferred Stock Basket Strategy As Of 9/10/15 - South Gent | Seeking Alpha
Trading Snapshots Since 11/30/16 Below: 
Profits are hard to come by now since most of these bonds are trading above par value. The issuers reserve the option to redeem these bonds at par value which may generally be exercised at their option on or after a particular date set forth in the prospectus, usually around five years after the IPO. The optional call right at par restrains price appreciation above par value when rates are declining as that optional call data approaches or has past when investors recognize that it is to the issuer's advantage to redeem and refinance at a lower coupon and usually a longer maturity date. 
I am attempting to manage interest rate risk in part by selling my highest cost lots for whatever profit is available when I averaged down through additional purchases. When and if the price falls below my lowest cost lot, I will consider buying back the lot that was previously sold during a price pop. This will result in a number of immaterial realized gains, but hopefully my current yield will be going higher as the average cost per share declines. 
The general goal will be to earn interest without losing money on the positions. That objective will IMO become more difficult in the future. A long term secular bull market in bonds started in 1982. There is an animal known as a long term secular bond bear market and the last one lasted 32 years. 
I am now able to buy odd lots cost effectively in my IB account, where the commission rate is $1, or in accounts where I have an abundance of commission free trades. 


2017 Roth IRA EMP 50 Shares +$66.98

2017 THGA 16 Shares $20.55

2017 SOJB 100 Shares +$93.97

2017 GMTA 30 Shares +$13.36
2017 EBAYL 40 Shares +$11.58
2017 SWJ 50 Shares +$2.88
2017 EMP 30 Shares +$56.89
2017 HTGZ 76 Shares +$37.72
2017 HTGZ 76 Shares +$38.85
2017 SGZA 50 Shares +$36.26
2017 SWJ 50 Shares +$2.86
2017 THGA 50 Shares +$16.97

2017 RFTA 100 Shares +$26.24
2017 RFT 100 Shares $87.04
2017 GMTA 20 Shares +$44.45
2017 TANNZ 50 SHARES +$15.08
2017 TCRZ 50 SHARES +$44.47
2017 TANNL 50 Shares +$67.78
2017 PFK 100 Shares +$81.04
2017 ROTH IRA GATX 40 Shares +$124.78
2017 SWJ 30 Shares +$38.84
2017 SGZA 40 Shares +$51.29
2017 AFSS 50 Shares +$50.47
2017 AFSS 100 Shares +$87.94
2017 ELJ 50 Shares +$61.48
2017 TANNL 50 SHARES +$11.57
2017 TANNZ 50 SHARES +$95.47
2017 GMTA 50 Shares +$222.84
2017 TCRZ 50 Shares +$14.97
2017 TCRZ 50 Shares + $31.28
2017 Roth IRA EAI 50 Shares +$34.57
2017 ELC 50 Shares +$94.54
2017 Roth IRA THGA 50 Shares +$35.54
2017 Roth IRA SGZA 50 Shares +$56.55
2017 Roth IRA NGHCZ 50 Shares +$59.47
2017 Roth IRA 100 Shares of GBLIZ +$136.94
2017 GBLIZ 100 Shares +$171.06
2017 NGHCZ 50 Shares +$97.49
2017 NGHCZ 100 Shares +$149.54 
2017 SGZA 50 Shares +$100.07
2017 THGA 50 Shares +$42.71
2017 AGIIL 50 Shares +$6.62
2017 AGIIL 50 Shares +$23.47

2017 EMP 50 Shares +$102.92
2017 EMP 30 Shares +$64.6
2017 ELC 30 Shares +$107.22
2017 EBAYL 30 Shares +$59.28
2017 HTGX 50 Shares +$31.52
2017 JMPC 50 Shares +$214.96
2017 TANNZ 30 Shares +$211.47
2017 SLRA 13 Shares (partial redemption) +$7.15
2017 KWN (redemption) 50 Shares +$3.05
2017 KWN (redemption) 100 Shares $1.15
2017 KWN (redemption) 50 Shares +$53.5
2017 SLRA 37 Shares +$20.35 (redemption)

Total as of 12/19/17 =  $11,515.53

Snapshots will be added to this post when they become available.

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