Question about Corporate Bonds

CXMelga

Hello, can someone help me with the following question please.


I understand how corporate bonds work (so no problem there), what I am not sure about it how to check (before buying a bond that was issued several years ago, but still has some years left to run), if the issuer has been reliably paying the coupon (interest), on the bond when due?


For example lets say a bond was issued at a face value of £100 (which I understand is the standard), and it is now trading at £90 (so the bond market thinks it is worth less than the original face value), the company that issued the bond is still trading and solvent (paying their shareholders). On the surface of it there is no reason why the company should not of been paying the coupon over the last several years and continue doing so (as long as they are solvent). How can I be sure, obtain evidence the company has actually been paying the coupon ?


Thanks
CXMelga

Tom99

[FONT=Verdana, sans-serif]I am not sure where you would find that sort of history, maybe the company website and trawl through past press releases or whatever.[/FONT]

[FONT=Verdana, sans-serif]But that would be no guarantee of future payment. The market price for the bond gives you some idea of what the market thinks of the future risk.[/FONT]

[FONT=Verdana, sans-serif]The only advantage of buying individual bonds is that you can be reasonable sure of a guaranteed return (subject to the company!) if you intend to hold them to maturity.[/FONT]

[FONT=Verdana, sans-serif]For example Barclays Bank 5.75% 14/09/2026 price 114.6 will yield about 3.5% to maturity, however by the time you take into account the buy/sell spread which is much greater than a typical share, and the dealing cost, that return will be lower.[/FONT]

[FONT=Verdana, sans-serif]When looking at current prices remember bonds are traded excluding the accrued dividend so if you buy a bond on 1st March which pays out on 1st Jan and 1st July you will pay the quoted price plus the dividend from 1st Jan to 1st March. The reverse happens when you sell the bond. [/FONT]