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This Week’s Topic: A Risky Looking Bond May Not Be What It Appears

SUMMARY:

Many investors who are tolerant of the risks of owning stocks, even growth stocks with outrageously high price/earnings ratios, categorically refuse to consider a below investment-grade bond. These lower rated bonds are called High Yield (or Junk) Bonds. This may be overlooking a potentially profitable security whose risk characteristics you may find acceptable as a part of your portfolio.

Understanding a corporation’s financial situation and the research analysis which has lead to its stock being recommended may go a long way toward easing fears of purchasing a BB-rated situation. A “Make Whole Default Call” may also bring added comfort.

Similarly, bond ratings do not change as quickly as the news that leads to them. Simply asking about any pending take-over details or presence on the “Watch List” for positive indications can make a B3/B- bond look more like the Aa3/A+ bond of its acquirer.

Click for A Risky Looking Bond May Not Be What It Appears PDF

If your portfolio is greater than $500,000, Sharon Alister can provide a free analytic review to help ensure that your portfolio is in line with your investment goals. Call Sharon Alister at (800) 745-7110 or email info@AlisterTalksBonds.com

 

Interest Rates (Indications only)

Please note the rates for Ins’d and Pre-Res are not available from Bloomberg and will be updated as soon as possible.

Treasuries AAA Munis
3mo 1.815 N/A
6mo 2.009 N/A
1yr 2.237 1.74
2yr 2.482 1.87
5yr 2.809 2.19
10yr 2.970 2.53
30yr 3.145 3.14
today's rates chart

AAA Rated Munis

Pre-Res Ins’d Pure*
2 yr 1.91 2.05 1.87
5 yr 2.23 2.49 2.19
10 yr N/A 2.89 2.53
15 yr N/A 3.20 2.82
30 yr N/A 3.50 3.14

*Rated AAA on its own
Source: Bloomberg

This Week’s Topic: A Risky Looking Bond May Not Be What It Appears

SUMMARY:

Many investors who are tolerant of the risks of owning stocks, even growth stocks with outrageously high price/earnings ratios, categorically refuse to consider a below investment-grade bond. These lower rated bonds are called High Yield (or Junk) Bonds. This may be overlooking a potentially profitable security whose risk characteristics you may find acceptable as a part of your portfolio.

Understanding a corporation’s financial situation and the research analysis which has lead to its stock being recommended may go a long way toward easing fears of purchasing a BB-rated situation. A “Make Whole Default Call” may also bring added comfort.

Similarly, bond ratings do not change as quickly as the news that leads to them. Simply asking about any pending take-over details or presence on the “Watch List” for positive indications can make a B3/B- bond look more like the Aa3/A+ bond of its acquirer.

Click for A Risky Looking Bond May Not Be What It Appears PDF

If your portfolio is greater than $500,000, Sharon Alister can provide a free analytic review to help ensure that your portfolio is in line with your investment goals. Call Sharon Alister at (800) 745-7110 or email info@AlisterTalksBonds.com

 

Interest Rates (Indications only)

Please note the rates for Ins’d and Pre-Res are not available from Bloomberg and will be updated as soon as possible.

Treasuries AAA Munis
3mo 1.815 N/A
6mo 2.009 N/A
1yr 2.237 1.74
2yr 2.482 1.87
5yr 2.809 2.19
10yr 2.970 2.53
30yr 3.145 3.14
today's rates chart

AAA Rated Munis

Pre-Res Ins’d Pure*
2 yr 1.91 2.05 1.87
5 yr 2.23 2.49 2.19
10 yr N/A 2.89 2.53
15 yr N/A 3.20 2.82
30 yr N/A 3.50 3.14

*Rated AAA on its own
Source: Bloomberg

Investing involves risk, including possible loss of principal. When investing in bonds, it is important to note that as interest rates rise, bond prices will fall. Conversely, as interest rates fall, bond prices will rise.

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