The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing


Subject:  Re: Corporate Bond Market Spreads Date:  8/11/1999  8:57 AM
Author:  pauleckler Number:  13058 of 96819

Intercst, thanks for the posting. I hope you will share some of your expertise over on the Bond and Fixed Incomes board under Investors Roundtable.

Agreed that it is better not to buy bonds on the open market if you can avoid it. New issues appear to be a better deal. But in reality their costs are hidden.

If you follow the trail of a corporation that decides to issue a bond for financing: deals are struck along the way, the expensive services of the investment banker are retained to price the bond, decide on the coupon and maturities, and get it rated, and finally a distribution mechanism offers the bond to the individual willing to buy it. Meanwhile mechanisms are set up to record who owns each bond and pay the interest payments.

Its a pretty good bet the corporation that issues the bonds pays well for all these services. The individual that buys it pays some of it too.

Some see this as an antiquated or even shady side of Wall Street. But its a valuable service. The question is can it be made more efficient. Bonds do provide capital for those who need it--presumably at a price they feel is competitive or attractive. In reality it gives corporations more options for financing. And it gives investors willing to take the time to learn attractive but usually conservative investment opportunities.
Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us