Get a guaranteed 11% for life with Barclays Bank Corporate bond

eeja

If you feel secure that Barclays wont go belly up and have a minimum of 100k to invest this may be your solution. Why bother with fixed rate deposits yielding half that rate ? Details below
Last Price Update : 13 Nov 2008
Price : 83.95
Coupon : 9.0%
Yield : 10.96

sabretoothtigger

Interesting, I always thought surely there must be something like this available. Cant see why they should be too fussy about where the cash they need comes from.

Have you got a link for it. Their share price is lower then ever, so this bares a relation to that?

Apparently they did/do hold one of the highest amounts of toxic debt, seems likely since they have a large amount of american operations. Also they are apparently the worlds largest etf dealer, no wonder they bought lehmans assets

What I meant to ask is there any kind of protection for investment like this, 50k?

I remember we had a post about b&b pib someone had inherited and basically lost it all. These are more shares then savings I guess, hence the risk/reward.
Isnt that halifax 10% regular saver ac still going

Baldur

eeja wrote: »

If you feel secure that Barclays wont go belly up and have a minimum of 100k to invest this may be your solution. Why bother with fixed rate deposits yielding half that rate ? Details below
Last Price Update : 13 Nov 2008
Price : 83.95
Coupon : 9.0%
Yield : 10.96

Doesn't look so great if you look at its past 5 years market performance - http://www.selftrade.co.uk/quote.php?symbole=4uEB23

eeja

sabretoothtigger wrote: »

Interesting, I always thought surely there must be something like this available. Cant see why they should be too fussy about where the cash they need comes from.

Have you got a link for it. Their share price is lower then ever, so this bares a relation to that?

Apparently they did/do hold one of the highest amounts of toxic debt, seems likely since they have a large amount of american operations. Also they are apparently the worlds largest etf dealer, no wonder they bought lehmans assets

What I meant to ask is there any kind of protection for investment like this, 50k?

I remember we had a post about b&b pib someone had inherited and basically lost it all. These are more shares then savings I guess, hence the risk/reward.
Isnt that halifax 10% regular saver ac still going

Of course there is no gov guarantee. If there were all current savings accounts with banks and building societies would pack up overnight as nobody would be interested in them..or at least nobody in the know (generalisation of course) !! Its quite likely many of these institutions hold corporate bonds and then offer rates of one third to savers and take a nice cut . Of course all subject to the risk of Barclays going bust. If you cannot accept the risk better to place your money with National savings or Northern Rock at one third the interest rate. ps everytime you cross the road you are taking a risk...its called risk aversion a matter of how risk- averse you are and whether the reward compensates for any risk. But come on...do you really think Barclays Bank will go bust, and even if it did , not be bailed out by the UK government ?

opinions4u

Corporate Bonds are an intriguing investment option.

1) They have a capital value that can rise and fall - there is risk.
2) They are loans to a company. If that company defaults, your capital value falls. Companies tend to default in times of recession.
3) The higher the return, the higher the risk. Different Corporate Bonds have different risk profiles. You could be lending your money to exceptionally risky companies via a Corporate Bond and not realise it.

There is a place for these things and they can be a successful investment. A 'AAA' rated Corporate Bond is lower risk than a unit trust tracker type fund in a major index, but if you're savings are effectively being lent to companies' with junk status, you are in exceptionally high risk territory.

Only buy if you genuinely know what you're doing, or have taken advice from a reputable IFA who can substantiate exactly why Corporate Bonds are better for you than a gazillion other investment vehicles out there. And make sure you clarify the exact risk profile of the fund your money is heading towards.

Don't buy simply because a stranger on a forum says they're a good thing!

sabretoothtigger

So the potential return on these is above 11%, its interest and the potential rise in its capital worth? Sounds better then shares

If 100k is the minimum buy in, you either have to be incredibly rich or basically take stupidly high amounts of risk.
Would be nice to have 5% of a portfolio in these, however my lottery ticket didn't come in this week



So a few years back when they were 150, the effective return was 6% not including risk to capital? Is there a fixed number of this type of bond

gozomark

opinions4u wrote: »

3) The higher the return, the higher the risk.

that should read "the higher the risk, the higher return required to compensate"

eeja

sabretoothtigger wrote: »

So the potential return on these is above 11%, its interest and the potential rise in its capital worth? Sounds better then shares

If 100k is the minimum buy in, you either have to be incredibly rich or basically take stupidly high amounts of risk.
Would be nice to have 5% of a portfolio in these, however my lottery ticket didn't come in this week



So a few years back when they were 150, the effective return was 6% not including risk to capital? Is there a fixed number of this type of bond

Dear Friend,
What you write is absolutely correct. Fair comment
What the general public do is buy BOND FUNDS which are available everywhere. These spread the risk and enable small investors to get a piece of the action with investments from 1k up.
OK perhaps it was wrong to even mention corporate bonds on this forum but several people have recently posted saying they had just sold their house or received a large legacy / windfall and asked for ideas on where to invest these sums . Also nothing on this savings forum saying its intended only for small savers is there ? Martin could of course add that to the forum rules if he so wished or more likely divide the forum into one section for small savers seeking total security and a second section for risky investments such as shares and larger less secure fixed interest products .

Aegis

The fact that a corporate bond is trading at less than 85% of its par value when its coupon is 6% higher than the base rate should really worry private investors. This essentially means that despite the astonishingly high yields, large institutional investment houses are leaving it alone for the most part, and that they probably have good reason for it.

All in all, much riskier than the "Guaranteed 11% for life" claim made in the title of this thread...

meester

Aegis wrote: »

The fact that a corporate bond is trading at less than 85% of its par value when its coupon is 6% higher than the base rate should really worry private investors. This essentially means that despite the astonishingly high yields, large institutional investment houses are leaving it alone for the most part, and that they probably have good reason for it.

All in all, much riskier than the "Guaranteed 11% for life" claim made in the title of this thread...

Exactly. The problem is the 'for life' bit, someone else probably bought this as '9% guaranteed for life', but when they went to sell, the capital value had fallen. There's no capital guarantee.

The price reflects the default risk of Barclays until forever. If that increases, the price will fall further.

eeja

Aegis wrote: »

The fact that a corporate bond is trading at less than 85% of its par value when its coupon is 6% higher than the base rate should really worry private investors. This essentially means that despite the astonishingly high yields, large institutional investment houses are leaving it alone for the most part, and that they probably have good reason for it.

All in all, much riskier than the "Guaranteed 11% for life" claim made in the title of this thread...

Really. Ok could suggest some bonds /pibs trading at 135 . Are you saying these must therefore be safer using the same logic that the lower the price the more risky the bond ?
Best keep away from products one does not really understand and stick to National Savings, Northern Rock etc etc
PS The reason the words 'for life as long as Barclays dont go belly up' were used was because these bonds are perpetuals ie do not have a maturity date. Remember Consols and War Loan ?.....well like these 'undated'