Corporate Bonds

Lokolo

eeja wrote: »

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 $ 100K amounts !!

Yeh I've got selftrade in my favourites. Its just basically I am saving as much money in my S&S ISA without investing it, until I have enough that I want to go and see an IFA. Being 20 I think it will be another 2 years before I go and see one, and I would like a better rate than I am getting at the moment. (I always stick with £3600 cash, £3600 shares - cash is first priority, saving for house deposit).

I will wait until I change funds (5 months) and then consider maybe buying into a bond fund.

eeja

Lokolo wrote: »

Yeh I've got selftrade in my favourites. Its just basically I am saving as much money in my S&S ISA without investing it, until I have enough that I want to go and see an IFA. Being 20 I think it will be another 2 years before I go and see one, and I would like a better rate than I am getting at the moment. (I always stick with £3600 cash, £3600 shares - cash is first priority, saving for house deposit).

I will wait until I change funds (5 months) and then consider maybe buying into a bond fund.

A million thanks to lokolo ! Without his reference to HL we would never have seen the following which says EVERYTHING one has wanted to know about corporate bonds but never dared to ask ! :namely ..they are pretty safe .

To put this into context, historical data shows that the actual five year (investment grade) default rate reached a peak of 2.4% in 1986. Even when the technology bubble was about to burst, the default rate only reached 1.4% while it remained below 1% throughout the 1970s. Even during the Great Depression and the pre-war year that followed the default rate never got above 5% for investment grade bonds.

sabretoothtigger

Hmm two threads with the same name at the same time in the same section :laugh:

This boots bond gives you a 20% return just for holding it six months. It matures next may. Is boots about to collapse or does that make no sense

http://www.selftrade.co.uk/quote.php?symbole=4uEBO9

It was a similar price 1 year ago

StevieJ

sabretoothtigger wrote: »

Hmm two threads with the same name at the same time in the same section :laugh:

This boots bond gives you a 20% return just for holding it six months. It matures next may. Is boots about to collapse or does that make no sense

http://www.selftrade.co.uk/quote.php?symbole=4uEBO9

It was a similar price 1 year ago

How does that give 20% if it is valued at 93, presume matures at 100? I never look at individual bonds. I just seen it GRY how is it worked out?

sabretoothtigger

Not sure, a return of 5.5% must due soon I guess then you get another 7 in just 6 months time which doubles thats return effectively to 14%


Must be an illiquid market, virtual prices like the 3.20 standard life shares sold for or not


http://www.bondscape.co.uk/feed.html

purch

This boots bond

.......is rated (BBB)not much better than Junk, hence the Yield

http://markets.ft.com/ft/markets/reports/FTReport.asp?dockey=GIG-211108

StevieJ

purch wrote: »

.......is rated (BBB)not much better than Junk, hence the Yield

http://markets.ft.com/ft/markets/reports/FTReport.asp?dockey=GIG-211108

But will Boots be able to stumble along until next May when they are redeemed.
Could someone explain what the risks are here, bearing in mind the short timeframe to redemptiom.

Myrmidon_J

StevieJ wrote: »

But will Boots be able to stumble along until next May when they are redeemed.

Could someone explain what the risks are here, bearing in mind the short timeframe to redemptiom.

Very simply, the risk is that the company issuing the bond will default on its payments (or payment, singular!). If the loan is unsecured (which seems likely, though I admit I am not certain), then capital may also be at risk.

The market is effectively pricing in a very high risk of default. If the market is efficient, this risk can be logically evaluated - and mitigated, perhaps, through hedging and other techniques.

However, if the market is efficient, the next few years will witness the highest ever rate of default in publically traded companies - surpassing the great depression, the recessions of the 70s and 80s and the tech bubble. To me, this seems unlikely.

I think the market has been distorted by distressed sellers of bonds and equities. But I wouldn't put all my eggs in one basket and purchase one bond (if that were even possible). One of the best ways to reduce risk is through diversification!