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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 35365  
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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Author: trader2012 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33932 of 35365
Subject: Re: This or that: Lloyds or Goldmann Sachs? Date: 3/28/2012 1:35 PM
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That which is not available cannot be preferred. The GS bond was a single someone grabbed while I was scrambling to do comapratives.

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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: 33934 of 35365
Subject: Re: This or that: Lloyds or Goldmann Sachs? Date: 3/28/2012 2:33 PM
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Hi Charlie!

The specific one I was looking at appears to be gone, though I do see plenty of other GS bonds out there maturing at the same time frame, some above par, others just below. I also notice (on Etrade) that some are described as "multi-step." How are you supposed to know from Etrade what the next steps up are?

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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33937 of 35365
Subject: Re: This or that: Lloyds or Goldmann Sachs? Date: 3/28/2012 4:08 PM
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How are you supposed to know from Etrade what the next steps up are?
************************

You should be reading the prospectus of any bond you are seriously considering buying. That would have the details.

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Author: blacktreechaser Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33939 of 35365
Subject: Re: This or that: Lloyds or Goldmann Sachs? Date: 3/28/2012 4:48 PM
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If you go to finra.org and use the correct tabs...I think the first is investors, and then the second is bonds, it should take you to a couple of fill-ins where you can put in the CUSIP, or the stock symbol of the company, and you should find info on the bond your interested in.

If all else fails, call the company at their Investor Relations number. I've always been treated polite from those departments, and if you ask them to explain it in simple terms, they will.

You might also find the same info on etrade if you click on the right things.

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Author: trader2012 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33941 of 35365
Subject: Re: This or that: Lloyds or Goldmann Sachs? Date: 3/28/2012 5:00 PM
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folgore,

When you do a bond scan at E*Trade (or at any broker with a decent search engine), the output of the scan is a list, with each bond being a hot link. Clicking on the link will open a "Bond Detail" page on which a bunch of further info is given, one of which will be the call schedule and another the step schedule (which becomes available as a drop down menu). Poke around. Everything you need to know about the bond is probably there.

Suggestion: Stop worrying about how bonds are priced with reference to par and, instead, pay attention to what your total inflation-adjusted yield will be. That's what matters, not whether there will or won't be cap-gains.

Since you were attracted by the yield offered by Lyoyd's new issue and were benchmarking it against GS, I'd suggest you look at all banker bonds. It's highly likely that if any of them get into trouble, all of them are going to get into trouble, because they're all making related bets, directly or through derivatives, and often with each other, hence the panic on the part of American banks over Greek bank problems. Typically, they don't own Greek debt directly, but they wrote CDS against it.

OTOH, if your search constraints are single-A or better, no more than 8-10 years out, offering 5.5% or better, then poke around in the munis. Possibly, you could find less problematic debt with better yields. And, no, you won't be making the 8.25% on Lloyd's debt in its last two years, for the bond, for sure, having already been called. Like any of the serial issuers (Barclays, GE, GS, BofA, GMAC), all of them issue beaucoup step-bonds and then call them before maturity. But if shopped carefully, it's sometimes possible to pick up extra bps on a favorable call created by the pricing of an odd lot.

Charlie

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