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Author: folgore Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35649  
Subject: This or that: Lloyds or Goldmann Sachs? Date: 3/28/2012 12:39 PM
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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?
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