Financial Preference Bonds Paying 8.5% Interest

Joey122

I m not sure everyone knows this but people like Citigroup and Deutsche Bank are paying 8.5% coupons on their bonds

Has anyone gone ahead and bought these? Which brokers did you use.

You are 2% more interest for lending to a massive bank (which is unlikely to go bankrupt) then the top payer Icesave which is more of a credit risk.

The only thing that you do not get is the FSA guarantee on these but is Citigroup / Deutsch ever going to go bankrup?

They might have problems but they will get bought out / taken over if they cannot meet liabilities in which case you are still fully protected

Aegis

8.5% will be the nominal value of these bonds. If you pay above the original price, then the actual yield will be lower. In addition, you will get back the original price at redemption, not necessarily what you pay for the bond on the secondary market.

Corporate bonds should not be compared with savings accounts, as it's comparing a cash deposit with a fixed-interest investment. Two very different beasts, and it's important to know that while corporate bonds tend to pay better rates, they are a much more risky investment than a cash account.

That's not to say they're a bad idea, but they'd be better as part of a long-term investment portfolio.

Joey122

I believe 8.5% is the coupon and these are trading at par -

I have always wondered if you can get bond price quotes online without an expensive bloomberg terminal