Weekly reports | May 14, 2020
Download the associated file: DirectBonds-Indicative-Fixed-Rate-Senior-Bonds-20200514-0853
PDF file attached. Guide below.
Corporate bonds offer an alternative to investing in stocks by providing a fixed ‘coupon’, or interest payment, unlike stocks which pay (or not) non-fixed dividend payments, and a maturity date. , unlike actions which are indefinite.
Bonds of listed companies can be traded in the same way that listed stocks can be traded. Bonds bought at issue and held to maturity do not offer capital appreciation like stocks can, but assuming there is no default, they do not offer capital appreciation. more risk of capital decline. Pricing is based on the market’s perception of default risk, or “credit risk,” throughout the life of the bond.
Bonds offer a capital risk / return if traded on the secondary market within the limits of issue and maturity. Coupon rates are fixed, but bond prices fluctuate based on perceived changes in credit risk and changes in prevailing market interest rates.
Note that the attached tables provide three “yield” figures for each issue, namely “coupon”, “yield” and “current yield”.
If a bond is purchased at a face value of $ 100 and a coupon of 5%, and the face value is returned at maturity, the current yield is 5% and the yield, or “yield to maturity.” maturity ”is 5%.
If a bond is bought in the secondary market at more than $ 100, the current yield, which is the annual yield for each year the bond is held, is less than 5% because the coupon is paid on the face value. The yield to maturity is also lower than the coupon, as more than $ 100 is paid to receive $ 100 back at maturity.
If a bond is bought in the secondary market for less than $ 100, the current yield, which is the annual yield for each year the bond is held, is greater than 5% because the coupon is paid on the face value. The yield to maturity is also greater than the coupon, as less than $ 100 is paid to receive $ 100 back at maturity.
Note that if a bond trades in the secondary market for more than its face value, this implies that the market thinks the bond is less risky than when it was issued, and if at a lower price it has become more risky. Bonds that trade for much higher yields than their coupons are therefore not a good deal on their own, just a higher risk / reward investment. In any case, the supply and demand balances of bonds will also have an impact on secondary prices.
Also note that although most coupons are fixed, the attached table also provides the prices of Capital Indexed Bonds (CIB) and Indexed Annuity Bonds (IAB).
This service is provided for informational purposes only. It is not, and should not be treated as, a solicitation or recommendation to buy corporate bonds. Investors should always consult their financial advisor before acting on any information gleaned from this service. FNArena does not guarantee the accuracy of the information provided. Note that although FNArena publishes this chart weekly, prices are fluid and may change throughout each trading day. Therefore, the prices shown may not reflect actual market prices at the time of reading.
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