I'm hearing alot about corporate bonds lately.

zedyy

I don't know whether or not its a red herring but alot of IFA's and market analysts are talking about corporate bonds having a good yield and that now is the time to get into them. Can anyone shed any light on this and if so, how does one go about buying corporate bonds?

dunstonh

Some are very attractive, some are not. They offer good potential but there is no guarantee as to if and when the potential will be reflected in returns.

Certainly, there doesnt appear to have been a better time to buy corp bonds (apart from Nov/Dec last year) in recent times. However, there is no guarantees.

how does one go about buying corporate bonds?

Depends on whether you are looking at the actual bonds or bond funds. It also depends on what tax wrapper you want to hold them in (unwrapped, ISA, Unit trust, investment bond or pension).

Worst thing you can do is look at past performance and assume they are all the same risk. They range from cautious to damned high risk.

The_Fiddler_2

Are funds a better bet (excuse the pun ) than buying bonds direct?

unhealthyman

The_Fiddler wrote: »

Are funds a better bet (excuse the pun ) than buying bonds direct?

As I understand it, with funds you have no control over whether any individual bonds are held to maturity or not, but you spread the risk of any individual bond defaulting, and (hopefully) have a fund with a decent selection of bonds picked by the fund manager (who I'd hope could do a better job than I.)

On that note, is there a compelling reason for me not to put some money in a corporate bond fund, like: Aegon Investment Grade Bond
Is there anything I'm not seeing or anything iffy about it? (For example, I notice that one has a large(ish) holding in Lloyds bonds - so more risky than others perhaps?)

Greycrow

unhealthyman wrote: »

Is there anything I'm not seeing or anything iffy about it? (For example, I notice that one has a large(ish) holding in Lloyds bonds - so more risky than others perhaps?)

An interesting article on that subject here:
http://www.ft.com/cms/s/0/b2979466-e997-11dd-9535-0000779fd2ac.html

gozomark

unhealthyman wrote: »

is there a compelling reason for me not to put some money in a corporate bond fund

are you prepared to lose any of your capital ?

unhealthyman

Interesting.

However, that fund has recently dropped in price anyway - so could the risk of some of the banks defaulting already be priced into it? Although I guess investing in that fund would partiallly be a punt on if (and which) banks get nationalised?

gozomark wrote:

are you prepared to lose any of your capital ?

Pretty much. Yes.
If I put £1000 in it, I'd be happy to risk losing some of it. Partially because I think that if the banks start getting nationlised I will probably have bigger worries that losing 10% on a unit trust, and I prefer being an optimist.

I'm planning more on putting smaller monthly amounts into a couple of funds in the hope that things will get better eventually, but I was just pondering plonking a larger chunk of money in soonish.

dunstonh

The pricing of them reflects the expectation that a good number could fail. Some are priced in as much as 50%. If that happens, it wouldnt hit the price much (in theory). If its worse, it will go down more. If its not as bad then it should go up and you have picked up a bargain.

sabretoothtigger

I didnt realise you could buy only 1000

B&B paid out on their pib apparently and NR too?

Entertainer

sabretoothtigger wrote: »

I didnt realise you could buy only 1000

B&B paid out on their pib apparently and NR too?

I believe that the NR junior debt was guaranteed but the B&B was not so bondholders are facing near wipeout.

Edit: just read the B&B pibs have made a dividend payment so don't know what the situation is.

ANGLICANPAT

Corporate bonds can seem very good one minute, and rubbish within a short time. One of the financial papers tips a few years ago was for Hendersons preference and Bond fund. I put in for a fair few k's , and its done really badly. I dont know whether to consolidate my losses and switch to Perpetual , or hang in in the hope of recovery. Every move I make these days seems wrong.