I recently saw a couple of ads in ourlocal Los Angeles Paper and I would like your comments, (as I'm still struggling to learn).Fed and State Tax Free - 4.50% - Cuppertino, Ca.2002, Refinancing Capital Imp. COP - Aaa/AAA rated, AMBAC INSURED:Matures 7/01/24, yield to materiality 4.50% Priced at 100 callable 7/01/09 @$102 - $25,000 minimum. the way I understand it, is even tho it's offered at par, the likelihood of it being called is low, and money would be tied up until 24 - not a good ideaFed Home Loan Bank (FHLB) bond S&P AAA ratedCoupon 6%, matures 10/30/17, yield to maturity 6%, priced at 100, callable 1/30/03 @ $100 - $50,000 minimum. again at par but money tied up a long timeWhat other information should I be looking at. It was very helpful when you explained the difference between State obligation vs. Revenue.I then went to CNN Money and looked up Bonds with AAA and maturities up to 2007. All of them were at a premium. I was looking for AAA only, as I want safety first, and I don't want to tied up money too long in this climate. This is a sample of what I found:All AAA, quantities of 25.Federal Housing.<t>Coupon 4.55 Matures: 9/17/04, Yield 2.06 LY 2.060 Price 104.575Coupon 4.15 Matures: 4/26/05 Yield 2.44 LY 2.446 Price 104.095</t>Federal Nat.Mortgage<t> Coupon 6.40, matures 8/14/07, Yield 3.48 LY 3.48 Price 112.943</t> questions: What's the different between Yield and LY - they are both the same. Also the fact that they all are at a premium, does that mean when they mature the Yield is even less because they will be at 100 rather than the price purchased, or is that accounted for in the premium price
Open, I'l let Chris do her level-headed spiel about the consequences of buying at premium -- or just do a search of her past messages-- and, instead, comment on "yields", of which there are many: to maturity, to call, current, lowest, etc. The easiest way to sort them out is to get a good introductory bond book and read it like you would any textbook, with a high-lighter in one hand and a pencil/pen in the other for notes. My favorite to recommend is Sharon Wright's Getting Started in Bonds. Others prefer Annette Thau. Amazon or B&N will list a half dozen more. Don't hesitate to use a book shopping bot and to search out used copies. After you've worked your way through one intro, try Fabozzi's <Handbook of Fixed Income Securites, any edition. (The older ones can be found cheaply.) And, of course, don't hesitate to borrow through ILL when your local library, predictably, doesn't have th enext book you'll need, which is Barnhill's book on high yields, not because you want to buy them, but because -- as I keep saying in this forum-- the book does a really good job of talking about how the bond market really works and the things investors need to be aware of if they buy their own individual bonds (as opposed to throwing themselves on the mercies and vagaries of the fundies). Charlie
I'd say you're learning just fine.What you're finding is, it is hard to get a good yield with any "investment grade" corporate or muni bonds right now. If interest rates stay around where they are now (or lower) for a long time, it will turn out that buying at these yields was a good idea. Otherwise, waiting is the best policy.I think there have been a lot of people chasing bond returns (from capital gains plus yields on funds), others fleeing to what is not as safe as they think, and game players going with where the momentum is. I'm afraid there are going to be a lot of seniors, especially, who sought safety in bond funds, who are going to be looking at more losses.
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