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High Yield Bonds definition

admin — Mon, 21 Jun 2010 02:20:35 +0000

By definition a high-yield bonds is a high paying bond with a lower credit rating than investment-grade corporate bonds. It also has a lower credit rating than Treasury bonds and municipal bonds. The upside of this is that because of the higher risk of default, these bonds pay a higher yield than investment grade bonds.

Based on the two main credit rating agencies, high-yield bonds carry a rating of ‘BBB’ or lower from S&P, and ‘Baa’ or lower from Moody’s. Bonds with ratings above these levels are considered investment grade. Credit ratings can be as low as ‘D’ (currently in default), and most bonds with ‘C’ ratings or lower carry a high risk of default; to compensate for this risk, yields will typically be very high.

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What are I Bonds

admin — Fri, 17 Jul 2009 07:35:30 +0000

I Bonds are a low-risk, liquid savings product. While you own them they earn interest and protect you from inflation. You may purchase I Bonds at www.TreasuryDirect.gov and at most local financial institutions.

Additional Inflation Bond Facts:

I Bonds earn interest from the first day of their issue month.
You can redeem them at any time after a twelve-month minimum holding period
They are an accrual-type security
They increase in value monthly and the interest is paid when you redeem the bond
I Bonds are sold at face value; i.e., you pay $50 for a $50 I Bond
I Bonds grow in value with inflation-indexed earnings for up to 30 years
If you redeem I Bonds before they’re five years old, you’ll forfeit the three most recent months’ interest; at or after 5-years old, you won’t be penalized.

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Should I invest in bonds?

admin — Mon, 13 Jul 2009 12:20:58 +0000

Here is a basic checklist to see if it will be to your advantage to invest in bonds.

Yes, if you have at least $100,000 to invest. It takes bonds from at least 10 issuers to create a diversified portfolio. However, to get decent pricing, you’ll need to buy them in blocks of 10 or more. Since bonds are typically issued in $1,000 increments, that means you’ll need at least $100,000 just for the fixed-income portion of your portfolio. Anything less and you’re better off sticking with a fund.

Yes, if you want a steady stream of income. Say you’re a retiree who needs to generate $5,000 a month. You could go with a bond fund that currently yields enough to produce that payout. But over time, as the manager sells current holdings and buys new ones, the portfolio’s average yield will sway – and could fall short of your target. With individual bonds you can lock in precise payments for a definite length of time.

Yes, if you’re investing for a specific period. Unlike funds, individual bonds mature on a given date. This makes them ideal if you know you’ll need a set amount of money at some point in the future – say, for your kid’s college education.

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What are Build America Bonds (BAB)

admin — Tue, 07 Jul 2009 22:48:01 +0000

Build America Bonds are part of the federal stimulus plan and provide a 35% rebate on interest costs to issuers or a tax credit to investors, at the issuer’s discretion. What this means is, because of the 35% federal government return, it turns into a lower borrowing rate despite of the fact that it draws a higher taxable financing cost to the issuer.

While a BAB could draw a higher taxable financing cost to the issuer than a tax-exempt bond, the 35% federal government giveback turns it into a lower borrowing rate.

When issued in large amounts and structured differently than the typical municipal bond, these securities could attract nontraditional muni investors, such as pension funds and foreign governments. BAB bonds are giving investors the opportunity to diversify risk into an asset class which historically is very stable.

Bonds to fund municipal projects normally are sold in the tax-exempt arena. With the advent of the Build America Bonds, or BABs, the $2.7 trillion market for tax-free debt is expected to see less volume in the months ahead. That has boosted this market also, with prices of the highly rated, long-term muni bonds advancing almost 0.3 percentage point.

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Basics in investing

admin — Sat, 04 Jul 2009 03:24:10 +0000

There are many misconceptions in investing; whether in stocks or bonds or in building an investment portfolio in general. Carl Richards at Behavior Gap has an interesting article in getrichslowly.org

Many of the commonly-used approaches to financial planning take long-term average rates of return and then make the assumption that you will get that return every year. Say you build an investment portfolio that you think will have an average return of 8.5%. Just because the average is 8.5%, it should be obvious to anyone that has been alive the last 12 months that this does not mean we will get 8.5% every year.

While this may seem obvious, the implications are huge.

Link

Basics of a permanent portfolio fund The perman
Investing: Permanent Portfolio fund Investment

What are NSANDI Premium bonds?

admin — Thu, 04 Jun 2009 07:01:42 +0000

What are Premium Bonds?

Premium Bonds are an investment where, instead of interest payments, investors have the chance to win tax-free prizes. When someone invests in Premium Bonds they are allocated a series of numbers, one for each £1 invested. The minimum purchase is £100 (or £50 when you buy by monthly standing order), which provides 100 Bond numbers and, therefore, 100 chances of winning a prize. You can hold up to £30,000.

With 23 million bondholders holding £26 billion worth of Premium Bonds nationwide, Premium Bonds are one of Britain’s financial success stories. They are a fun, yet serious way of saving, combining the chance of winning tax-free prizes with the peace of mind that comes from knowing your capital is 100% secure.

Prizes

As well as the £1 million jackpot you can win anything from £25 to £100,000 for each Bond number you hold. If you win the jackpot, you will get a visit from Agent Million.

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Mr. Buffett on the state housing sector

admin — Tue, 05 May 2009 11:17:55 +0000

“In the last few months you’ve seen a real pickup in activity although at much lower prices,” Mr. Buffett said, citing data from Berkshire’s real-estate brokerage business, HomeServices of America Inc., which is one of the largest in the U.S.

In California, medium and lower-price homes — under $750,000 — have been selling more, though there hasn’t been a bounce back in sale prices, Mr. Buffett said. “We see something close to stability at these much-reduced prices in the medium to lower part of the market.”

Source: http://finance.yahoo.com

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Government bonds fall amidst stimulus bill uncertainty

admin — Tue, 10 Feb 2009 06:21:42 +0000

Government bond prices fell, although they climbed slightly off early session lows as the stock market stumbled amid investor anxiety about the timeline of the stimulus bill.

The benchmark 10-year note edged down 16/32 to 105-31/32 and its yield rose to 3.04% from 2.99% late Friday, February 6.

The 30-year bond fell 23/32 to 113-19/32 and its yield rose to 3.75% from 3.69% Friday. The last time bond ended the day with a yield above 3.70% was Nov. 24. when it finished at 3.78%.

The 2-year note dipped 3/32 to 99-22/32 and its yield rose to 1.05% from 0.99% late Friday.

The yield on the 3-month note rallied to 0.29% from 0.28% Friday. The 3-month is a short-term gauge of confidence in the marketplace, because investors shuffle funds in and out of the bill as they assess risk in other places.

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