Try to understand corporate bond

daxu

Hi,
I sold some share in my HL SIPP and try to get bit safer investments due to my age (not retirement yet, but graddually getting there).

I am trying to understand corporate bond as I think for some bonds issued by giant company, it is unlikely to give me a negative shock.
for example, bond issued by Lloyds bank (e.g. XS0503834821). It will mature next April
wand with a bi-annual coupon frequency with redemption 22/April 2025.
Does this also have a Record date concept for coupon?
I googled online, I can find that it has a Coupon payment date 10/22/2024, so next Tuesday. If it has a record date, I guess it would be too late for me to buy Monday to receive coupon payment?

Many Thanks

ColdIron

I think you mean corporate bond

daxu

ColdIron said:

I think you mean corporate bond

yes. thanks

wmb194

daxu said:

Hi,
I sold some share in my HL SIPP and try to get bit safer investments due to my age (not retirement yet, but graddually getting there).

I am trying to understand corporate bond as I think for some bonds issued by giant company, it is unlikely to give me a negative shock.
for example, bond issued by Lloyds bank (e.g. XS0503834821). It will mature next April
wand with a bi-annual coupon frequency with redemption 22/April 2025.
Does this also have a Record date concept for coupon?
I googled online, I can find that it has a Coupon payment date 10/22/2024, so next Tuesday. If it has a record date, I guess it would be too late for me to buy Monday to receive coupon payment?

Many Thanks

Yes, they do have ex-coupon* dates and if the next one is next week you’ll have missed it. 

*Even though they pay interest they’re still usually referred to as ex-dividend dates. 

daxu

wmb194 said:

daxu said:

Hi,
I sold some share in my HL SIPP and try to get bit safer investments due to my age (not retirement yet, but graddually getting there).

I am trying to understand corporate bond as I think for some bonds issued by giant company, it is unlikely to give me a negative shock.
for example, bond issued by Lloyds bank (e.g. XS0503834821). It will mature next April
wand with a bi-annual coupon frequency with redemption 22/April 2025.
Does this also have a Record date concept for coupon?
I googled online, I can find that it has a Coupon payment date 10/22/2024, so next Tuesday. If it has a record date, I guess it would be too late for me to buy Monday to receive coupon payment?

Many Thanks

Yes, they do have ex-coupon* dates and if the next one is next week you’ll have missed it. 

*Even though they pay interest they’re still usually referred to as ex-dividend dates. 

hI, is there some site which I can find ex-coupon/ex-dividend date for these bonds? On hl, I can't see this information.

daxu

wmb194 said:

daxu said:

Hi,
I sold some share in my HL SIPP and try to get bit safer investments due to my age (not retirement yet, but graddually getting there).

I am trying to understand corporate bond as I think for some bonds issued by giant company, it is unlikely to give me a negative shock.
for example, bond issued by Lloyds bank (e.g. XS0503834821). It will mature next April
wand with a bi-annual coupon frequency with redemption 22/April 2025.
Does this also have a Record date concept for coupon?
I googled online, I can find that it has a Coupon payment date 10/22/2024, so next Tuesday. If it has a record date, I guess it would be too late for me to buy Monday to receive coupon payment?

Many Thanks

Yes, they do have ex-coupon* dates and if the next one is next week you’ll have missed it. 

*Even though they pay interest they’re still usually referred to as ex-dividend dates. 

Sorry, mind if I ask another question? Is it right to say that the bonds issued by those giant companies are quite safe (e.g. one raised by TESCO, big banks etc)? As inflation is going down, I think the interest paid seems to be better than saving in a long run, say 5 year period.

Voyager2002

daxu said:

Sorry, mind if I ask another question? Is it right to say that the bonds issued by those giant companies are quite safe (e.g. one raised by TESCO, big banks etc)? As inflation is going down, I think the interest paid seems to be better than saving in a long run, say 5 year period.

They are relatively safe... the price can go up and down unless you hold them to maturity, and there is always a chance that the company could go bankrupt and be unable to pay its debts.

Aretnap

daxu said:

wmb194 said:

daxu said:

Hi,
I sold some share in my HL SIPP and try to get bit safer investments due to my age (not retirement yet, but graddually getting there).

I am trying to understand corporate bond as I think for some bonds issued by giant company, it is unlikely to give me a negative shock.
for example, bond issued by Lloyds bank (e.g. XS0503834821). It will mature next April
wand with a bi-annual coupon frequency with redemption 22/April 2025.
Does this also have a Record date concept for coupon?
I googled online, I can find that it has a Coupon payment date 10/22/2024, so next Tuesday. If it has a record date, I guess it would be too late for me to buy Monday to receive coupon payment?

Many Thanks

Yes, they do have ex-coupon* dates and if the next one is next week you’ll have missed it. 

*Even though they pay interest they’re still usually referred to as ex-dividend dates. 

Sorry, mind if I ask another question? Is it right to say that the bonds issued by those giant companies are quite safe (e.g. one raised by TESCO, big banks etc)? As inflation is going down, I think the interest paid seems to be better than saving in a long run, say 5 year period.

They are probably safer on average than bonds issued by small companies but they are still high risk compared with a bank account. Large companies are not immune from debt restructuring or outright bankruptcy - Lloyds for example did come very close to going bust during the financial crisis of 2008.

Investing in either shares or bonds of a single company is always going to involve a significant risk. To reduce the risk spread your investment across bonds issued by many different companies, or invest in a bond fund which will do the spreading for you.

dunstonh

I am trying to understand corporate bond as I think for some bonds issued by giant company, it is unlikely to give me a negative shock.

Famous last words of every person who held a single company corporate bond that failed.

 Is it right to say that the bonds issued by those giant companies are quite safe (e.g. one raised by TESCO, big banks etc)?

Absolutely not right to say that.  Safer than smaller company bonds but nowhere near as safe as a corporate bond fund or a portfolio of corporate bonds.   A general rule of thumb for retail investors is not to exceed more than 5% of their investable assets in a single unregulated investment.   If one fails, you have lost 5% which is no big deal.   If you hold 50-100% in it, then it is catastrophic.

Eyeful

1. A corporate bond is an IOU issued by a company. It is only as good as the company that issued it. Holding a single bond or share is high risk. Why do you not look into bond funds that might fit the risk profile you are interested in?
https://www.trustnet.com/News/13406708/the-most-consistent-uk-bond-funds-of-the-decade/

2. Have you thought about using a simple Global Multi Asset Fund. This provide a ready made portfolio, all you need to do is decide on the share/bond split that you are comfortable with.
Example: https://www.hsbc.co.uk/investments/products/hsbc-global-strategy-portfolios/#balanced

3. Have you considered a Target Date Fund to glide you into your retirement?
Example: https://www.vanguardinvestor.co.uk/investing-explained/what-are-target-retirement-funds

gm0

This is a somewhat sophisticated investment.  Single bond.  Caution.  For a consumer investor. 

Your questions imply that you don't (or not yet) completely understand how bond markets work and clean and dirty prices.  No shame in that as it is obscure and jargon rich.

And how the act of holding a fund - which keeps buying and selling bonds while their prices vary. Is different from holding a single bond to term. Buying a cashflow - once.  (With the counterparty risk - can they pay - attached)

Single bond - coupon. coupon. coupon. nominal principal back at the end with price inbetween a lot less important to you.  Fund - daily unit price with coupons reinvested.  And varying in the resale market on capital values.  Driven by sentiment and central bank rates.

They are quite different things.   That suit different purposes.  The fund doesn't expose you entirely to a single company failing or restructuring its debt.  The single bond does.  The single bond doesn't expose you to prices and returns moving with interest rates as a fund buys/sells bonds in the fund maintaining its mix and average duration. 
*Provided you hold it to term as planned*  

The fund does expose you to central bank rate movements.  As in 2022.  Interest rate sharply up.  Bond fund  and bond resale prices sharply corrected down.  Some people bought a long time ago and it all comes out in the wash.  Went up and back down some.  Others bought at the top and are hurting. 

Someone sat with a bond holding it to term saw a change in possible value to sell it. But as not selling - it was insignificant to them.  The fund holder was hurt.  The bond holder was not.

Yet if you need the capital back early and sell a bond to do something else with the money - the single bond resale price will have varied with interest rates based on its duration - just as the fund does.

Purpose and timescale.  Desired return.  Mix of risks you are willing to take.  Willingness to hold to term.