No. of Recommendations: 2
Run this scan. Ask to see all Aaa/AAA rated bonds offering a YTM of 3% or better. If you throw out those with a minimum-purchase of a round-lot, you’ll end up with the list and YTMS below.
Cpn Due Adj_YTM Issue
6.950 09/01/29 -2.6% Johnson & Johnson
8.500 11/30/29 -2.6% Intl Bk For Recon & Dev Colts
4.950 05/15/33 -2.5% Johnson & Johnson
4.750 02/15/35 -2.7% International Bk For Recon&Dev
6.100 04/01/36 -2.6% Xto Energy Inc
0.000 04/18/36 -2.1% Kreditanstalt Fur Wiederaufbau
7.250 09/01/36 -2.6% British Columbia Prov Cda
0.000 06/29/37 -2.1% Kreditanstalt Fur Wiederaufbau
6.750 08/01/37 -2.5% Xto Energy Inc
5.950 08/15/37 -2.4% Johnson & Johnson
6.375 06/15/38 -2.7% Xto Energy Inc
5.850 07/15/38 -2.5% Johnson & Johnson
5.625 10/01/38 -2.3% President&Fellow Harvard Coll
5.200 06/01/39 -2.3% Microsoft Corp
4.500 09/01/40 -2.5% Johnson & Johnson
4.500 10/01/40 -2.3% Microsoft Corp
5.300 02/08/41 -2.4% Microsoft Corp
4.850 05/15/41 -2.4% Johnson & Johnson
3.875 10/28/41 -2.4% Inter Amern Dev Bk Global Mtn
4.013 05/01/42 -2.3% Stanford Leland Jr Univ Board
3.200 08/07/42 -2.4% Inter Amern Dev Bk Global Mtn
3.827 10/01/42 -2.3% Columbia Univ Trustees N Y
7.250 11/02/96 -2.0% Mass Inst Tech Mtn Be
5.600 07/01/11 -2.2% Mass Inst Tech Mtn Be

Assumptions: Your order is for a single bond purchased through E*Trade. Your actually-experienced inflation-rate will average 5% over the holding-period of the bond. Your ordinary tax-rate is 25%. You can credit yourself for the implied tax-credit created by buying at a premium to par.

As you can see, to buy prime corporate debt at today’s prices will create a steady loss of your purchasing-power. Where, then, might a yield-hungry bond buyer find yield in today’s market? In the sub-prime stuff, which is to say, to overcome tax-risk and inflation-risk you will have to accept credit-risk. That is always the tradeoff. To attempt to diminish one is to accept the other. Bonds without credit risk will never, except in the rarest of circumstances, offer meaningful protection against tax-risk and/or inflation-risk. In the bond world, nothing is safe. Everything has risks. What you choose to buy depends on which risks you prefer to accept/avoid.

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