No. of Recommendations: 2
I was putting in screen time this morning, scanning for bond opportunities, and an offering Tenet's 9 7/8's of '14 caught my eye. The offer at E*Trade was 95.75, and they generally (always?) mark up bonds. So I priced them through IB, who quotes the inside market. But what I saw was that E*Trade's offer was under what was supposed to be the best offer. Immediately, I suspected that something was going on. So I pulled the news for the company. [Ticker: THC] Sure enough, there was a wire release dated July 24 with a headline of: “US CREDIT-HCA leads to speculation on hospital bonds”. I have no idea whether the situation represents an opportunity. That can only be discovered by doing one's due diligence. But the situation offers a lesson. When something seems out of the ordinary, it might be worth investigating.

So, I pulled all of E*Trade's offers on Tenet's bonds and encountered another surprise. Three of the five offers were being made in round numbers and the other two, though they were expressed as two-place decimals, really were meant to be understood as fractions. That's highly unusual. Bonds are normally priced with the decimal carried out to three places. Something is going on. Also, E*Trade was also pricing the 6 7/8 of '31 below the national between offer. So I guessed it was putting out low offers on all of Tenet's bonds which suggests that somebody is dumping. I have no idea why, or even that such is the case. But pricing anomalies are happening that might turn up an opportunity once the necessary legwork is done.

Caveat emptor!

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