11% interest on Barclays Bank bonds

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eeja
eeja Posts: 374 Forumite
in Savings & investments
Can any of our experts please explain why the yield on these perpetual bonds is so high and what the risks are currently in buying these corporate bonds for long term investment.
Thank you
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  • stevetodd
    stevetodd Posts: 1,016 Forumite
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    eeja wrote: »
    Can any of our experts please explain why the yield on these perpetual bonds is so high and what the risks are currently in buying these corporate bonds for long term investment.
    Thank you

    Have you got a link to this 11% bond? The only ones I can find on self trade for Barclays have alreday matured (is this the same one, it is showing 11%)
  • sabretoothtigger
    sabretoothtigger Posts: 10,035 Forumite
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    Its been mentioned before. The bond market in general is like this presently, it represents the risk of capital loss I suppose

    see selftrade for listings

    barclays shares have fallen two thirds in the last couple months. You can buy them for a pound but these bonds require 100k to buy I think, you would have to invest in a bond fund and Ive no idea if thats a good idea or not presently

    I have read that the bond prices reflect a greater prediction of default and failure now then ever before including the 30's depression
  • [Deleted User]
    [Deleted User] Posts: 12,492 Forumite
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    http://www.bondscape.net/feed.html

    it represents a high risk. A bond is a loan
  • miserable_ol_so_n_so
    miserable_ol_so_n_so Posts: 496 Forumite
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    Can someone clarify..........
    Can the bond issuer, Barclays in this instance, default on the interest payments and still stay in business?
    Has Barclays todate defaulted on any of such bonds?
    ....Illegitimi non carborundum

    ...don't let the illegitimate ones grind you down....
  • sabretoothtigger
    sabretoothtigger Posts: 10,035 Forumite
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    Barclays can go broke yes, most banks borrow ten times their own worth. I think this is what tier 1 capital % refers to
    tier 2 'assets' includes american sub prime debt afaik

    Not sure where bonds rank but they can fail to pay them, most likely they would be nationalised soon after as banks must pay their bills or no one would deal with them at all and barclays is the worlds largest ETF operator, etc



    B&B bonds, not currently paid afaik - http://forums.moneysavingexpert.com/showthread.html?t=1274443&highlight=barclays+bonds

    http://forums.moneysavingexpert.com/showthread.html?t=1350163&highlight=bonds
  • miserable_ol_so_n_so
    miserable_ol_so_n_so Posts: 496 Forumite
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    sabretoothtigger wrote: »
    Barclays can go broke yes, most banks borrow ten times their own worth. I think this is what tier 1 capital % refers to
    tier 2 'assets' includes american sub prime debt afaik

    Not sure where bonds rank but they can fail to pay them, most likely they would be nationalised soon after as banks must pay their bills or no one would deal with them at all and barclays is the worlds largest ETF operator, etc



    B&B bonds, not currently paid afaik - http://forums.moneysavingexpert.com/showthread.html?t=1274443&highlight=barclays+bonds

    http://forums.moneysavingexpert.com/showthread.html?t=1350163&highlight=bonds

    And if it were to default and get nationalised, would the government continue to pay the bondholders?
    ....Illegitimi non carborundum

    ...don't let the illegitimate ones grind you down....
  • sabretoothtigger
    sabretoothtigger Posts: 10,035 Forumite
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    They arent paying b&b bonds till the other debts are clear afaik.
    ie. b&b would have to make a profit on its assets/liabilities, obviously nobody believed this would be the case
  • baby_boomer
    baby_boomer Posts: 3,883 Forumite
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    Exactly.

    There is a risk of the yield falling to 0%.

    At that point you would also suffer severe loss of capital as the value of the bond plummeted.

    It's not interest - it's a yield. There is no obligation for the bank to pay out if it is in financial difficulties.
  • stevetodd
    stevetodd Posts: 1,016 Forumite
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    kittie wrote: »
    http://www.bondscape.net/feed.html

    it represents a high risk. A bond is a loan

    Thanks for the link, 2 things i noted:

    1. It's perpetual, so no 'safe end date' to reach and perhaps save you if things look like they may turn bad.
    2. What a wide spread (between the bid and ask prices), seems the ones trading in the bonds are getting the real value
  • eeja
    eeja Posts: 374 Forumite
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    stevetodd wrote: »
    Thanks for the link, 2 things i noted:

    1. It's perpetual, so no 'safe end date' to reach and perhaps save you if things look like they may turn bad.
    2. What a wide spread (between the bid and ask prices), seems the ones trading in the bonds are getting the real value
    ..............
    Safe end date ? 11% for life seems a good deal for me and inflation is not a problem now or in the forseeable future.
    Spread....that depends on the dealers and is always negotiable.
    The only way to lose out is if Barclays Bank goes belly up and were that to happen it would surely be rescued as too big to fail.
    Agreed ?
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