No. of Recommendations: 2
"I've found one bond that yields more than 9% (coupon was 5%) and is rated Ba3/A."

I would be very wary of a bond that pays unusually high yield for its bond rating. It is a flashing yellow light that must be explained before I would invest.

Some possible reasons--

>The bond is about to be called and the call price is holding down its market value giving it a higher yield than normal. (If you pay over the call price, it can be called out from under you at a loss.)

>Some news event has occurred that makes people think the bond is about to be downgraded. (Remember that bond ratings for iffy investments were very much a part of the subprime melt down. Bond ratings work best for ordinary good quality, very boring bonds that just keep paying their interest. Anything fancy and ratings may not be reliable.)

>Some bonds are insured to get them higher bond ratings, but the insurance has recently been shown to be based on those derivatives that caused AIG so much trouble. The insurance could be worthless. Is the bond rating still good? The insurer still solvent?
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