Any reason to avoid this GSE Bond?

[MercyMe]

I now have the cash to fill a hole in my bond ladder for 2031. The original plan was to fill it with a treasury (paying roughly 4.25%), but I found a non-callable GSE paying 4.62% maturing in 2031 (CUSIP 3130B1CB1). I have other GSE's in my bond ladder and I don't think of them as having much risk over a treasury.

Yeah, its a bit yield chasing here, but it feels like this GSE is, more or less, no different than a treasury. Anyone see a problem built in to this CUSIP?

 

[pb4uski]

I didn't look at the CUSIP but, like you, I consider GSE issues to be just a slight notch below a treasury in terms of credit risk. I think a 37 bp premium over a similar maturity is good.

 

[imbatman]

I consider both pretty risk free so would definitely take that bump for a miniscule increase in credit risk

 

[MercyMe]

Thanks. I think the bump is worth taking but I feel like I'm missing part of the picture here for this particular bond. The non-callable is nice so I feel like there must be a down side that I've over looked.

 

[pb4uski]

I don't think you have but you could call your brokerage bond desk to discuss your concerns.

 

[Koolau]

In any case, it's unlikely that either choice would make a dramatic difference. So, I think I'd go for the extra yield. I'm sure you have a back-up in mind just in case there is a credit issue in the future.

 

[Texas Proud]

A GSE (from what I know) has an implied backing of the US gvmt... the treasuries do not... there is a risk that the gvmt will not back them, hench the higher rate...

IMO both are so low on the default possibility that I would not hesitate to buy a GSE if I were so inclined...