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This morning’s attempt to sell off some more of my mistakes was an eye-opener. First, I tried to sell three corporates:

-Five of Barrick’s 5.8’s of ’34, bought 08/24/09 at 90.219 for a YTM of 6.6%, but an inflation-adjusted YTM of -0.9%.
-Three of Protective Life’s 8.45’s of ’39, bought in two lots in ’10 at an average price of 107.409 for an average YTM of about 7.5%, but an inflation-adjusted YTM of about -1.2%.
-Three of M&I’s 4.5’s of ’23, bought 03/05/06 at 95 for a YTM of 4.9%, but an inflation-adjusted YTM of -1.4%.


I received no bids for Barrick or Protective, and a two points below the market bid of 96 (best of 2 with 7 passes) for M&I which I accepted, because it scratched me out of the position. (I had paid 95 --after commish-- to get in. I received 95 --after commish-- to get out. Meanwhile, I had collected five years of coupons. So the mistake got fixed at a reasonable cost. Next, I tried to sell two agencies:

-One of FICO’s 0’s of ’16, bought 02/17/10 at 78.705 for a YTM of 3.8%, but an inflation-adjusted YTM of -1.1%.
-Three of TVA’s 0’s of ’30, bought 12/03/09 at 43.914 for a YTM of 4.1%, but an inflation-adjusted YTM of -0.8%.


The current market for the FICO was 93.010 x 91.417 (ask x bid) but the single bid for my position was an underwhelming 68.803, or so far away from the market as to be laughable. The current market for the TVA was only a bid of 44.400, but the single bid for my position was an underwhelming 35.429. YTD, I might have sold off 25 corporate positions, some of which were done at very favorable terms, some not so. But none of the bids were as far away from the market as the bids I received for my agencies. Admittedly, two bids is a very small sample, as even are 50 bids, which is probably how many I’ve solicited so far on corporates. But the difference between the two markets was shocking and the opposite of what I expected. By and large, spreads are tighter for agencies than corporates (just as spreads for Treasuries are tighter yet). So I expected I would have little trouble getting out of my agencies at a favorable price, because that certainly was the case when I sold some Treasuries many years ago. Where the market was was what I got, not a discount from it. Lastly, I recycled a bit of the recaptured cash by adding to an ongoing position. Now I'm done for the day, but still puzzled and annoyed by my attempted selling experience with agencies.

Charlie
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