Corporate bonds?
Discussion
Could someone shed a little light on these please?
For example: http://www.hl.co.uk/shares/shares-search-results/b...
No redemption date, decent yield, fairly safe co. - what gives?
TIA
For example: http://www.hl.co.uk/shares/shares-search-results/b...
No redemption date, decent yield, fairly safe co. - what gives?
TIA
The safety of it is relative.
Technically speaking it's a High Yield (aka Junk) bond. It's a Junior Subordinated issue, which means in the event of a default, you're second-last in the queue for any claims, just before Equity holders.
The bond is callable in Dec 2018, i.e. Barclays can buy it back at a price of 100. It's currently trading at 106 so, if nothing else changes you would stand to lose 6% on the notional amount. Although in reality the fair market price should converge back to 100 as we get closer to Dec 2018.
If the bond is not called, the coupon will revert in 2019 to 3M Libor+400bps, as it stands that would mean 4.59%.
So the risk/return profile will change dramatically.
Finally there's a question of entry point.
Due to its equity-like nature, this bond's price should be quite correlated to Barclays' equity price.
If you believe Banks/Barclays haven't quite stopped dropping, then chances are this bond will drop too. Hence I would hold off.
If instead you believe in a recovery story, now might be a good entry point.
Technically speaking it's a High Yield (aka Junk) bond. It's a Junior Subordinated issue, which means in the event of a default, you're second-last in the queue for any claims, just before Equity holders.
The bond is callable in Dec 2018, i.e. Barclays can buy it back at a price of 100. It's currently trading at 106 so, if nothing else changes you would stand to lose 6% on the notional amount. Although in reality the fair market price should converge back to 100 as we get closer to Dec 2018.
If the bond is not called, the coupon will revert in 2019 to 3M Libor+400bps, as it stands that would mean 4.59%.
So the risk/return profile will change dramatically.
Finally there's a question of entry point.
Due to its equity-like nature, this bond's price should be quite correlated to Barclays' equity price.
If you believe Banks/Barclays haven't quite stopped dropping, then chances are this bond will drop too. Hence I would hold off.
If instead you believe in a recovery story, now might be a good entry point.
Edited by matrignano on Wednesday 24th February 14:07
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