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Author: junkman02 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35387  
Subject: Corporate Bond-Ladders Date: 7/25/2009 4:03 PM
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I dislike building corporate bond-ladders, because they are expensive to create. To build a ladder that is fully-runged (of whatever length), one is typically going to be paying a premium for some of the rungs. (The needed bonds just won’t be available at a reasonable price.) However, if one is just shopping value and buying what should be bought rather than what has to be bought, and if one is buying enough bonds to create a reasonably-sized portfolio, then a bond ladder will happen all by itself. So that was my question this morning.

What sort of ladder results from the bonds I have bought YTD?

Friday, I held my nose and added another position, bringing my YTD total to 44 new positions. Of them, 5 are zeros. But 39 of them pay twice-yearly coupons. I spent $32,197 to buy those bonds whose CY is 9.46%, or what should be expected from a portfolio of lower-tier investment-grade bonds that focuses on total-return, rather than just current-yield. (If current-yield had been my prime focus, then the current-yield would have been significantly higher.)

Here is the schedule of coupons. The ladder is a bit raggety. Some fortnights, a lot of money in incoming. Some fortnights, none at all. But, on average, the income-stream is $127 per payment date. If the portfolio were larger, then, obviously, the income-stream would be more significant, as well as could been made more predictable. But I prefer lower prices and a bit of unevenness rather than the higher costs of convenience.


1-Jan $115.63
15-Jan $255.50
1-Feb $0.00
15-Feb $176.75
1-Mar $236.18
15-Mar $133.13
1-Apr $152.13
15-Apr $101.63
1-May $30.00
15-May $166.25
1-Jun $130.00
15-Jun $25.75
1-Jul $115.63
15-Jul $255.50
1-Aug $0.00
15-Aug $176.75
1-Sep $236.18
15-Sep $133.13
1-Oct $152.13
15-Oct $101.63
1-Nov $30.00
15-Nov $166.25
1-Dec $130.00
15-Dec $25.75
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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28290 of 35387
Subject: Re: Corporate Bond-Ladders Date: 7/25/2009 11:37 PM
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Agreed buying short bonds in a formal initial bond ladder is costly and gets you not much yield these days.

One way around the problem is to build your initial ladder by buying your longest bond again and again over the lenght of the ladder at appropriate intervals. Hence, a 10 yr ladder at 2 yr intervals can be constructed in 10 years by buying a new 10 yr bond every two years for ten years.

The yield curve tells you that yields fall for shorter bonds. This way you buy the high yield end and then earn capital gains--at least on paper--as the market values increase with shortened maturities.

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