Another Called Bond

Another Called Bond

I mentioned a while back that some of my Fannie Mae bonds had been called--meaning redeemed for their full face value. It has happened again, with some Federal Home Loan Bank Board bonds. These had a 5.7% coupon, and since I bought them a little under par (meaning, for a bit less than their face value), I enjoyed more than 5.7% annualized yield for several years.

I would love to know exactly what is happening with all these called bonds. If they are being called because homeowners are selling their houses, that's a positive sign for the economy. If they are being called because homeowners are refinancing their houses at lower interest rates, that's good for the homeowners. It may be good for the economy if the extra money in their pockets every month gets spent buying goods in depressed parts of the economy.

I need to accelerate my rate of bond buying--to call what you get from money market funds a "yield" is a bit misleading: it's more like surrender!

UPDATE: That's odd. There is suddenly a dearth of government agency bonds with decent yields--the best that I can find are some Fannie Maes maturing in 2029, with a yield to worst of 5.040%. Perhaps that's because the markets haven't opened.

UPDATE 2: Yes, there are some Fannie Maes now with 5.7% annualized yields to worst now.