Corporate Bonds

stevetodd

Lokolo wrote: »

steve - yeh thats why I was looking at it, it adds a bit of balance to my currently risky portfolio.

Jon - ok thats fine. so if I bought at issue the running yield would be the same as the yield?

How does the gross redemption yield work? Say this one is 6.5%, is it basically a little bonus added on top as a 'thanks'?

I looked at them myself, not so much for now, because the stock market is so low that I will probably invest in a tracker isa next year. But much later when (if ever lol) the stock market gets quite high. I was thinking rather than lose the isa status of my stocks and shares isa's by cashing them in. I would transfer them to corporate bonds as the tax free increases the yield so when comparing to a non isa high street savings account, they give a decent return.

sabretoothtigger

Why isnt hbos yielding more if they are such a disaster

qamwc1

Lokolo - the redemption yield and the running yield are dependent on the price of the bond. Only the coupon is fixed - 4.375% in this case.

The price depends on many things eg credit rating of the issue entity, market interest rates, demand and supply of the bond etc.

Lokolo

Ah ok I see. If you bought them at release the yield would be x. But currently because of price changes etc. the yield is y (which is the running yield...).

I assume the redemption yield is just basically the calcualtion from running yeild until maturity (AER)?

And finally.... if corporate bonds are for large amounts of money, what are normal bonds called? For lower amounts (and I know you can get funds for these) for people like me who are just starting out?

(Also I know banks etc. give out bonds, but these are usually just fixed term savings accounts rather than actual bonds so to speak, I want to be able to differentiate myself from these)

SeanW

Lokolo wrote: »

How does the gross redemption yield work? Say this one is 6.5%, is it basically a little bonus added on top as a 'thanks'?

It works because there is a gain being made to capital as well as the interest. If the bond's nominal price is £100 but you are paying £95 for it, when it matures, you get £100 back from the issuer, so you've made a £5 profit, plus the interest.

The £5 profit is built into the redemption yield which is why this figure only means something if you hold it to maturity.

Similarly, you could pay £105 for a bond, and you will make a £5 loss to capital if held to maturity, and so this is factored in and you would have a redemption yield lower than the running yield.

sabretoothtigger

The final interest rate payment is a biggy!



http://uk.biz.yahoo.com/11112008/323/gm-likely-survive-bonds-buy-jpmorgan.html


Where are gm bonds quoted

purch

And finally.... if corporate bonds are for large amounts of money

They are not.

Very few Bonds have a set minimum, although it is unlikely you can get a tradeable price on a small amount under £10k

My SIPP holds a huge variety of Bonds, all bought to held to maturity, in a wide range of nominal (face) value.

How does the gross redemption yield work?

It is the calculation that shows the total return on a Bond held to maturity (redemption). If you intend to hold to maturity it is the only figure that really counts (and of course it does not take into account the compounding of coupons received during the term.....which will increase the total yield further)

Lokolo

Ok all of that sounds cool and I understand that now. However, is there anywhere I can find out how to invest in these? HL say that you must ring them to find out prices, but I can't seem to find anything but funds of bonds, rather than just bonds on themselves.

The magizine also has a list of the top 10 at the current time, but I am not sure where I can see loads across the board.

Thanks in advance.

sabretoothtigger

Selftrade lists corporate bonds, uk ones at least. The GM bonds are cheap enough to actually buy maybe and are recommended as a good gamble apparently, it would be quite impressive to have one in a portfolio I imagine and possibly very profitable especially if held to term

Would chapter 11 wipe out bond holders, probably wise to read up on that. My basic understanding is they need to renegoiate with the unions in order to make a profit and increase efficiency for present levels of economy of scale.
Obamas health care changes may alter things?

eeja

Lokolo wrote: »

Ok all of that sounds cool and I understand that now. However, is there anywhere I can find out how to invest in these? HL say that you must ring them to find out prices, but I can't seem to find anything but funds of bonds, rather than just bonds on themselves.

The magizine also has a list of the top 10 at the current time, but I am not sure where I can see loads across the board.

Thanks in advance.

Unlike stocks, prices for which you can find on hundreds of websites the market in bonds is totally opaque. The market is in fact almost entirely OTC .
As for US dollar bonds I know of only one website that lists (a few) prices .
Unless you subscribe to the Reuters or Bloomberg terminal OR have a good broker who does, I'm afraid you are b--ggered.
Note to Purch : all the $ bonds I have held were denominated in US $100,000K amounts !!