UKC

Corporate Bonds

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 icnoble 23 Dec 2008
Can anyone tell me about corporate bonds, are they a good and "safe" investment"?
 woolsack 23 Dec 2008
In reply to icnoble: Depends on the corporation in question. Given that the credit ratings agencies have proved to be totally untrustworthy, caveat emptor

Not wishing to give investment advice, if it were me I'd accept lower returns and opt for government issued debt. If that goes down you have bigger problems than investments
 Postmanpat 23 Dec 2008
In reply to icnoble:
Risk/reward lies somewhere between equities and government bonds. Quite simply,if the corporation stays in business then you get the guarenteed income each year and the face value of the bond back at maturity.However,if the company goes under you likely lose the lot.
There are some very attractively priced corporate bonds out there at the moment but given the likelihood of numerous bankruptcies in the next 12 months you really need to be careful about which ones you buy.
 Nic 23 Dec 2008
In reply to Postmanpat:

> However,if the company goes under you likely lose the lot.

Er, no - you are likely to recover (after some period of time...) a fraction of the capital (i.e. "x pence in the pound" depending on how badly the company "went under"). It's equities where you lose the whole lot when the company fails.

> There are some very attractively priced corporate bonds out there at the moment

For anything trading at less than (say) 80p in the pound, the market is most likely pricing in a large element of default risk...caveat emptor.


In reply to all:

I don't usually reply to these posts...but, if I can offer one thought, if you don't understand it, don't invest in it (or reply to the posts, it applies equally!)
 Misha 23 Dec 2008
In reply to icnoble: Try an IFA, but a properly independent one
 Postmanpat 23 Dec 2008
In reply to Nic:
> (In reply to Postmanpat)
>
> [...]
>
> Er, no - you are likely to recover (after some period of time...) a fraction of the capital (i.e. "x pence in the pound" depending on how badly the company "went under"). It's equities where you lose the whole lot when the company fails.
>
Well,yes and no.Bondholders are higher up the list of creditors than equity holders but it's perfectly possible for them to end up with nothing in a bad bankruptcy and the market price is certainly unlikely to reflect the actual capital loss in the case of bankruptcy.

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