In February I’ve had about 20k worth of GSE bonds called. These were essentially government loans to farmers. I had almost 6% interest on these bonds and it makes sense for whoever took out these loans to refinance at today’s lower rates.
Ironically, the recent PPI report had hotter inflation than expected which has led to the current market sell off because the Fed may not be lowering rates as much as expected. If inflation does indeed move up from here then interest rates will need to go higher so I plan on buying some of those bonds back when rates go back up.
Bonds don’t last forever and I’ve slowly been getting bonds called or mature over the past few years so my bond portfolio actually shrank however I recently started buying TLT and I’m using that as a replacement for these bonds.
I prefer TLT because it pays a monthly dividend, I can write call options on it for additional income and if I think the ETF will drop in value I can hedge with puts or sell call OTM into the future.
I was well aware that these were callable bonds when I bought them and the interest was great but I do believe inflation will spike again and rates will rise again.
The current GSE bond offerings aren’t particularly interesting to me and I’m already struggling with large cash positions but I will find something to invest in at some point.
With the new war in the middle east, I expect volatility for the next few weeks so we’ll see what happens with the market. I was fortunate enough to own some oil stocks during this time frame so we will see if those increase in value. I may offload some if they spike significantly.
Share The Wealth
What are you investing in during this volatility?