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Kev,

First, congrats for running the numbers. Your willingness to do work puts you ahead of most investors who just want to be told what to buy, rather than figuring it out on their own.

I can’t find the bond you list, but I do see their 5.7’s of 7/15/14. 101.229 x 10 (1/1). That indicates to me you’re willing to buy as far down the credit-spectrum as A3/A and as far out the yield-curve as 5 years. The broker’s reported YTM for the 5.7’s is 5.26%. But if you extended maturities a bit, you could pick up their 6’s 0f ’17 for the cheaper price of 94 and your YTM would be higher, 6.953%.

If HSBC is going to blow up, how far out you are won’t matter. But your entry price will matter, as will how fast you began to recover your investment. Therefore, the ‘17’s are safer than the ‘14’s.

Also, as part of your due diligence, you should benchmark HSBC’s debt against its peers with this thought in mind. You want to take on the least amount of risk you have to in order to obtain the most reward. But I also wouldn’t put a lot of effort into the search. By my eye, a small position in HSBC isn’t going to be worse that what else is available.

You do need to realize that the bond is no longer cheap compared to where it was priced a couple months ago which, paradoxically, might be a good thing. Traders are bidding up the bonds rather than walking away from them. A lot of the issues I've been looking at are starting to roll over, indicating worry.

http://cxa.marketwatch.com/finra/BondCenter/BondDetail.aspx?...

Best wishes with the project, Charlie
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