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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
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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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: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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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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The ride is smoother in a convertible |
fundweb - Oct. 3, 2011 - By Tom Wills
Investing in convertible bonds is a useful policy in uncertain times. Because the investor is not directly exposed to stocks, the bond offers a level of protection if equity markets falter.
Investors sometimes overlook convertible bonds because it is easy to get confused by the technical terms of a specialised subject. However, the essential nature of a convertible is really quite straightforward: it is simply a regular corporate bond with a stock option attached.
So, by investing in a convertible bond, the buyer is effectively giving up part of the yield that bond earns by re-investing it in an equity option. By combining bonds and equity options into one hybrid instrument, the convertible offers the attractive proposition of a steady (albeit reduced) yield and participation in the rise of shares. The result is an asymmetric pay-off to stocks with much of the upside of the equity market and a reduced part of the downside.
Investors sometimes ask why they should not simply construct their own yield-plus-options pay-off by buying corporate bonds and exchange-listed equity options separately. The answer is that the options market is only liquid for large-cap stocks, and only then in short maturities such as three or six months. The convertibles market is the only efficient way to buy longer-dated four-to-five year options at wholesale prices. And in an uncertain world, options can be a valuable asset to own.
To prove this, we can take a recent positive period for stocks, using the year ended June 30, 2011. In that year, the MSCI World index rose 27.84%. Convertibles provided less than 60% of the upside, with the Merrill Lynch Global 300 (G300) Convertibles index rising 16.30%. But if we extend this analysis to the five years ended June 30, we see that the G300 returned 5.09% per year and the MSCI only 0.13%. Similarly, over 10 years, the G300 was up 4.41% per year while MSCI rose only 1.73%. Furthermore, this higher return was earned with far less volatility: over 10 years the G300 had annualised standard deviation of 9.63%, versus 16.59% for MSCI stocks. Indeed, in a period of uncertainty, it makes more sense to own an option than the underlying asset.
For the complete article.
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| Stuff to look at |
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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