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I'm starting to explore bond investing. I have a Fidelity account and have started looking for CA GO's. Fidelity's pickings are slim. I find only 3 medium term bonds (2018 maturity) which are currently unattractive.

Is this a function of the thin pickings in the bond market right now, or is it a function of Fidelity not having a good selection?

What brokers are best for bonds or are they all about the same? And if you have any other pointers for a new bond investor, I'm all ears.
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I have a Fidelity account and have started looking for CA GO's. Fidelity's pickings are slim. I find only 3 medium term bonds (2018 maturity) which are currently unattractive. Is this a function of the thin pickings in the bond market right now, or is it a function of Fidelity not having a good selection?

Yes. Both factors. By contrast, a scan for CA GO's at E*Trade returns 1155 hits. The same scan run at Zions Direct would offer about the same number.

The necessary conclusion is that what Fidelity does best (or any other broker also offering bonds as part of its product offerings, such as Scottrade, Ameritrade, Vanguard, Schwab, etc.) isn't bonds, because bonds are a customer accommodation for them, not one of their main interests or strengths. It's no different than with any other retail product. E.g., if you're interested in buying a fly rod, you don't go to Dick's Sporting Goods even though you might find a couple of fly rods in their racks. That's not their expertise. That's not the fishing crowd they cater to.

Said another way, Fidelity does some interesting, proprietary things with how they rank bonds, but they suck majorly in terms of breadth of inventory, ease of doing scans, etc. Ditto the aforementioned brokers. No matter how good they might be about other things, providing bonds to their customers isn't one of them.

Standard Disclaimers: I have, or have had, accounts with all brokers mentioned, plus others.

Charlie
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Correction:

A scan at E*Trade for CA GO's returns just 445 bonds, not the 1155 I reported.

Explanation: I selected GO as a parameter but failed to click <Only>.

But the basic point of my post remains valid, namely, that if a would-be bond investor is looking for bonds, Fidelity, Schwab, Vanguard, Scottrade, AmeriTrade, etc. are not the places to be looking. OTOH, E*Trade and Zions Direct are good places.
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This is the info I was looking for. Thank you.
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You're welcome.
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arthurdnt,

You wrote, I'm starting to explore bond investing. I have a Fidelity account and have started looking for CA GO's. Fidelity's pickings are slim. I find only 3 medium term bonds (2018 maturity) which are currently unattractive.

Is this a function of the thin pickings in the bond market right now, or is it a function of Fidelity not having a good selection?

What brokers are best for bonds or are they all about the same? And if you have any other pointers for a new bond investor, I'm all ears.


I have never found Fidelity's selection of available bonds wanting; but I've never used it to search for munis. Did you actually do your screen on Sunday?

I have to admit, I'm still a novice when it comes to muni bonds - I've yet to purchase an individual muni. But I assume the muni markets are similar to the corporate bond markets in that they really consist of a bunch of separate bond trading desks that may or may not have inventory available. (There is no concept of market makers that attempt to create an orderly and regular market for listed securities.) What's more, brokers can only report what the bond desks are telling them is available and most bond desks remove their listings at the end of the market day. In that respect the bond market is completely unlike the stock market - if no desk is currently listing a bond, the bond won't show up in any screens with your broker. It doesn't mean the bond doesn't exist - it only means no desk is currently offering it to retail investors.

If you did your bond screen after market hours (or on Sunday when you posted) you probably got a very limited selection of bonds because a number of desks had withdrawn their listings at the close of the previous market day. Today is Columbus Day, which is a bank holiday. The bond markets tend to observe bank holidays, so a screen today probably won't do you any good either.

In fact, this is one of the frustrating aspects of today's bond market - it means that you have to screen for purchases during normal business hours because that's the only time you can know what's really available for purchase. That can be difficult if not completely problematic for most people. I actually bought part of my current corporate bond holdings while I was spending a lot of time in South Korea. That made it practical for me to search bond listings, do research and execute a purchase because the bond market was open when I was not working. It's a lot harder for me to do the same today and it is part of the reason I hold preferred stocks as part of my portfolio. It is also part of why I never bought munis when the muni market was running scared earlier this year.

- Joel
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Joel,

Yes, I did my search shortly before posting. This shows how unexperienced I am. Thanks very much for the education. What an eye-opener. I now understand that I have to check periodically during normal market hours to see what is being offered at that time.

The more you know...
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FSMBonds seem to specialize in muni bonds. I never compared their offerring prices compared to others. I'm wary of any company that operates out of Florida.
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It is FMS Bonds not FSM, just FYI. But I wonder what is the advantage of such an organization if they have no original primary research? It looks like they are just a distribution channel for bonds they were able to place in their inventory cheaply, but without hard original analysis I don't understand what is their value add?
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For me the winner hands down among bond brokers is Interactive Brokers because they save you enormous amounts of time by accepting limit orders good-to-cancel on bonds. There is no bond "market" but IB is simulating one by doing day orders on electronic marketplaces like Bond Desk. I have put in really lowball bids on some bonds and then just walked away and have been pleasantly surprised when I get an execution three weeks later.

Having said that, IB is its own worst enemy and severely cripples their platform as follows:

1) They refuse to transact convertible bonds, which is a large number of corporate bonds.

2) They refuse to cover many lower liquidity bonds, and when you ask them to add them they give you extremely pathetic reasoning that makes it sound like they don't really have much control on the content of their platform. To my thinking it is the illiquid bond that is the one that you MUST have a good to cancel limit order capability for. You want to be the only bidder out there and you want the marketplace to see that bid day in and day out for weeks, to have any chance to execute. How can IB implement such a fantastic capability and then not have the simple common sense to understand what they have?

IB aside, I think it makes sense to keep a Fidelity account because I have found that Fidelity can facilitate trades on obscure bonds that no one else can transact. For example, I am interested in some Canadian debentures, which are effectively convertible bonds that trade like a stock on the Canadian TSX exchange. Try to get a quote or buy those through any major US broker...good luck. But Fidelity when pushed can do it. They can manually call in an order to a TSX affiliate and do a day order for you.

I have no experience with E*Trade, but I gather they have better inventory than most brokers, assuming you see any value in buying from the broker's inventory.
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