@leejr Ok thanks. I now realize only one of them is non-callable, and that is a J&J expiring 11/15/23 with a coupon of 6.75, and the bid ask is huge with 102.5% to 105.8% as bid ask, but even at bid it is only 4.035 yield to maturity, so still way less than Treasury, so I'm still confused.
@webdesignbellflower I'm not a bond trader so this isn't something I know a great deal about but how long ago were some of those bids made? A 4% yield on a blue chip company made sense in September. My understanding is the corporate bond market isn't the most liquid thing in the world so maybe these are just old bids. But like I said, this isn't something I know much about.
@ryukyu Interesting point. You may have nailed it. These show up today on vanguard, but maybe they’ve been sitting there for months at unreasonable prices since vanguard isn’t exactly a major bond brokerage.
@ryukyu Yeah I don't know either but it just seems like another investment product. The current market might be different because of the Fed rate hikes so it hard to compare unless there's historical evidence.
@webdesignbellflower Not sure about this table specifically, but for general information there is a good paper called Negative Credit Spreads: Liquidity and the limits to Arbitrage by K Bhanot
@webdesignbellflower For me treasuries under 1 year are probably the best option out of all the bond options. The state tax exemption can be a big deal for treasuries.
@cesaronline Thank you. I just want to point out that higher rate J&J bond is "Make Whole Callable" which I never heard of till yesterday, and can be called at some price in Jan 23 at a price calculated at that time. So the only one that has me stumped is the J&J 1 year paying 4 percent roughly.
Some other commenter made a good point- maybe that bid/ask has been sitting there a long time at unreasonable prices, since Vanguard isn't much of a bond trading exchange.
@webdesignbellflower Yeah we trade them all the time. But JNJ is pretty liquid I’ll check next time I look at Bloomberg. But just a quick glance I saw yield of almost 5% a few days ago and after this rate rally that bond looked to be 4.75% ish which implies a nearly zero default
@webdesignbellflower Companies issued bonds at lower rates last year. The current holders must sell at a loss to anyone willing to buy them now or must hold to maturity
@webdesignbellflower I would look at the AA-BBB ratings more when comparing, there are only a handful of companies even rated AAA. I mean the treasuries are only rated AA+
@webdesignbellflower One think could be required asset allocation. Some funds are required to diversify and therefore have to hold some corporate bonds.
