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

Aegis

eeja wrote: »

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 ?

No, I'm not. I'm well aware that the purchase cost of a bond depends on both the yield (taking into account time to redemption) AND the market view of the risk of that asset. Clearly at the moment with an extremely high yield and an extremely low purchase cost, that shows that the estimated default risk is much higher than you would expect for a large company. The fact of the matter is that financials are still suffering in this country, and Barclays are not seen as a good deal by the institutional investors right now despite the extremely good looking yields associated with these bonds.

Remember as well that paying back depositors in the retails banking side of things would be the top priority if Barclays were to be declared insolvent. You can pretty much guarantee that if Barclays did a Northern Rock, the bond holders would be much like the shareholders: screwed in favour of the depositors. As such, you'd probably need to be holding these bonds for 9 years to guarantee getting your money back, without adjusting for risk. Given that current conditions seem to suggest that even 9 months is a long time, why risk it?

Best keep away from products one does not really understand and stick to National Savings, Northern Rock etc etc

Clearly I understand these better than you thought. Next time try giving a real answer rather than insulting those who don't agree with you.

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'

Who mentioned maturity date? If Barclays start to go belly up, then the bond holder would be looking to rid themselves of the bonds, which could push the price right down and ake it worth a lot less than when it was bought. Just because it doesn't have a redemption date doesn't automatically make it a great lifetime investment.

purch

Couple of things to bear in mind....

These Bonds are close to untradeable at the moment...

Spread is something like 76.50/91.50

Gross Redemption Yield is not a factor as this is a Perpetual Bond

Yield to Worst assumes

A) No Default
The price remains unchanged at the time to choose to sell the Bond

A is far less likely than B

eeja

purch wrote: »

Couple of things to bear in mind....

These Bonds are close to untradeable at the moment...

Spread is something like 76.50/91.50

Gross Redemption Yield is not a factor as this is a Perpetual Bond

Yield to Worst assumes

A) No Default
The price remains unchanged at the time to choose to sell the Bond

A is far less likely than B

As usual spot on with your facts purch !!
May I just add a few facts with which I am sure you will agree are correct.
That Barclays have several perpetuals all investment grade . The one below has a spread of half the size of that quoted on Bondscape
Barclays Plc 7.125 Perpetual Bid 72.30 Offer 80.8 yield 9.31% Ytw 10.42%
Secondly the corporate bond market (CBM) is mainly OTC and to get accurate pricing you have to check both the Reuters and Bloomberg terminal as well as obtaining and negotiating prices and spreads directly with dealers in the market. Liquidity is an issue that can play a largish role in pricing
It is really unfortunate that unlike the major Stock Markets the CBM is quite opaque. Finally in my experience all investment grade bonds in Sterling Euro Yen and of course the predominent market US Dollar are tradeable as long as the price is right for both buyer and seller.

purch

Liquidity is an issue that can play a largish role in pricing

Yes.......and the market is particularly dry at the moment in many Bonds, even Supranationals.

The running Yields on these Perpetuals, including Stan Chart look enticing, especially when you wade through the hysteria and factor in the actual chance of default.

eeja

purch wrote: »

Yes.......and the market is particularly dry at the moment in many Bonds, even Supranationals.

The running Yields on these Perpetuals, including Stan Chart look enticing, especially when you wade through the hysteria and factor in the actual chance of default.

Without charging your normal fees for investment advice ( not being truly serious here) your view on the Stanchart and the Barclays perpetuals would be greatly appreciated . Could both these major banks with investment grade ratings really go bankrupt with no bail out from the UK Government ?
Barclays in the UK (and now the States having taken over much of Lehman Bros) is surely too big to go bust. Ironic also as its real birth / rebirth stems itself from the collapse of the London bankers Overend and Gurney in 1866 .
As for Stanchart being owned in large part by Temasek its unlikely that both the BOE AND Temasek would allow this jewel to fail ? Right or wrong ???

Reaper

Not sure I like the idea of putting too many eggs in one basket, but a Bond fund makes much more sense and I have been giving it some thought recently.

Yields are looking good though you have to factor in the higher rates of defaults likely as the recession starts to bite.

In today's Observer an article suggested L&G Dynamic Bond, and Henderson Strategic Bond amongst others.

Any thoughts on these and the bond market in general?

purch

In my less than useful opinion, the chances of Standard & Chartered or Barclays defaulting on these Bonds is slimmer than Victoria Beckham after 12 months on the Atkins diet.

purch

Any thoughts on these and the bond market in general?

I am not a huge fan of holding Fixed Income products in a Fund, but currently with the Yields so attractive, a well managed Fund like the Henderson Strategic Fund would be a sensible diversification of a portfolio.

gozomark

eeja wrote: »

Barclays in the UK (and now the States having taken over much of Lehman Bros) is surely too big to go bust.

I disagree - Barclays is too big to disappear, yes, but not too big to go bankrupt, and see all shareholders wiped out, incl holders of the bonds mentioned here

will it happen, unlikely, but not 0% chance

aqueoushumour01

corporate bonds have been having a tough time recently but with credit spreads as they are soon could be a good time to invest in a corporate bonds fund. Assuming things calm down there's scope for a nice capital gain as yields fall back to more 'normal' levels.