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| BondsOnline.com: instant access to and extensive coverage of over 3.5 million stocks, bonds, indexes and other securities covering major and emerging markets and exchanges across the globe. |
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| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
|---|
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S&P National Bond Index
|
3.00% |
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S&P California Bond Index
|
2.96% |
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S&P New York Bond Index
|
3.13% |
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S&P National 0-5 Year Municipal Bond Index
|
0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| More |
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| Income Equities: |
|---|
| Preferred Stocks |
|---|
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S&P U.S. Preferred Stock Index
|
848.03 |
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S&P U.S. Preferred Stock Index (CAD)
|
636.26 |
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S&P U.S. Preferred Stock Index (TR)
|
1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
|
1,276.26 |
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| REITs |
|---|
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S&P REIT Index
|
174.07 |
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S&P REIT Index (TR)
|
425.30 |
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| MLPs |
|---|
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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High Yield Corporate Bonds - A Safe Short Term Play With High Return Potential? |
FP Executive BLOG - August 04, 2009 - by Sacha Gera
With a bit of time on my hands over the last couple of weeks, I decided to study corporate junk bonds/high yield bonds as a short term investment play (3-6 months). High yield corporate bonds have been rallying for the last few months and I've questioning whether it will continue. In my opinion, my findings provided me with confidence that there is still a significant upside potential in this investment and the following attempts to explain why.
Disclosure: I am invested in TD High Yield Bond Series I.
Background on Bonds
For those who are not as familiar with bonds, here's a quick run down. All bonds, be it government or corporate, are evaluated based on risk. The higher the risk the greater the return for investors. Institutions like S&P and Moody's evaluate bonds with AAA-rated bonds being the lowest risk and therefore offering the lowest return - they typically consist of government bonds. Corporate bond ratings vary based on the healthiness of their respective balance sheets and business prospects. Typically, corporate debt rated BAA (using Moody's rating system) and below are considered sub-investment grade and are typically high yield bonds (i.e. offer higher returns). The chart below (source: Wikipedia) outlines bond ratings by three different institutions.
| Moody's |
S&P |
Fitch |
|
| Long Term |
Short Term |
Long Term |
Short Term |
Long Term |
Short Term |
|
| Aaa |
P-1 |
AAA |
A-1+ |
AAA |
A1+ |
Prime |
| Aa1 |
AA+ |
AA+ |
High grade |
| Aa2 |
AA |
AA |
| Aa3 |
AA- |
AA- |
| A1 |
A+ |
A-1 |
A+ |
A1 |
Upper Medium grade |
| A2 |
A |
A |
| A3 |
P-2 |
A- |
A-2 |
A- |
A2 |
| Baa1 |
BBB+ |
BBB+ |
Lower Medium grade |
| Baa2 |
P-3 |
BBB |
A-3 |
BBB |
A3 |
| Baa3 |
BBB- |
BBB- |
| Ba1 |
Not Prime |
BB+ |
B |
BB+ |
B |
Non Investmentgrade
speculative |
| Ba2 |
BB |
BB |
| Ba3 |
BB- |
BB- |
| B1 |
B+ |
B+ |
Highly Speculative |
| B2 |
B |
B |
| B3 |
B- |
B- |
| Caa |
CCC+ |
C |
CCC |
C |
Substantial risks |
| Ca |
CCC |
Extemely speculative |
| C |
CCC- |
In default with little
prospect for recovery |
| / |
D |
/ |
DDD |
/ |
In default |
| / |
DD |
| / |
D |
Purpose
The purpose of my bond study was to evaluate whether investing in sub-investment grade corporate bonds (aka: junk bonds/high yield bonds) was a good idea based on the current economic phase - all signals point to the economy entering 'early recovery'. The corporate high yield bond market has rallied 30+% over the last few months - will it continue?
to be continued...
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| Stuff to look at |
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S&P Commentary and Newsletters: S&P
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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