No. of Recommendations: 0
One of brokerage accounts is with Muriel Siebert. Every now and then, they give their account holders access to new bond offerings, particularly munis from New York. Yesterday, something totally unexpected came out: bonds from Lloyds TSB. I actually owned Lloyds stock several years ago when its price went through the floor during the worldwide bank crisis. LYG is still selling for something $2.20 per share.

Surprisingly, the bonds Muriel Siebert is offering (at par) are rated A/A2. They are "step up" bonds which mature in 15 years in 2027. During the first eight years, they pay 5%. During the next five years, they step up to 6.25%. And for the last two years, 8.25%. The bonds are callable at par beginning 4/12/17 and continually callable on the semi-annual interest dates thereafter. One therefore assumes they will be likely called before the first "step up" assuming Lloyds position continues to improve.

I immediately began to wonder if there was anything else out there rated A/A2 and maturing at 2027 or earlier paying a similar interest rate. The only thing I found was a Goldman Sachs bond with a coupon of 5% but which had an effective yield of 5.5% because it was selling at a slight discount to par. It too matures in 2027.

If the Lloyds bonds were to go the full distance, the overall interest yield would about 6% higher overall. More likely, one is comparing Lloyds 5% yield for eight years or less to Goldman's 5.5% for 15 years.

So, which of the two would most of you opt for?
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.