There's no real purpose to this thread other than giving anyone curious about bonds a look inside a deal I set up last night. Any comments are always welcome.
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I've started to practice corporate bond investing. I'm already good at businesses and notes, so I'm moving onto the next part of my strategy.
Bonds are effectively just loans to companies, and you can buy/sell these on a stock exchange. Eg: A company needs $1m to expand, so it will issue a million $1 bonds, and (normally) pay you x% interest ("coupon") either quarterly or semi-annually. Buying and selling these bonds, you can get them at a discount to face value, eg: $0.90 each, or at a premium, eg: $1.10 each. Once you own them, you receive interest, and then at the maturity date, the company pays you the $1 back (unless you've sold it before then). Bonds call also have a couple of different flavours, such as being "convertible" (ie: you can convert them to stock in the company).
Here's the info on the bond I bought: (well, I don't own it until the order is executed)
Company: deals in minerals and mining.
Current market price: $0.86.
Face Value: $1
Coupon: 10.5% quarterly (next coupon June 30)
Maturity: Sept 30, 08.
Before I go ahead, how much do you think this bond is worth?
This is a bond which has a low trading volume, and currently has a lot more sellers than buyers so I put in a bid of $0.60 per bond (remember that each one is a $1 bond which matures in 4 months).
I am one of only 6 buy orders, and one other also has an offer of $0.60. The market has been open for about 2 hours now, and the order hasn't been executed yet. I'll have to wait and see. I might be too optimistic with my price, but if I get it, it's a super-bargain.
Daniel.
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I've started to practice corporate bond investing. I'm already good at businesses and notes, so I'm moving onto the next part of my strategy.
Bonds are effectively just loans to companies, and you can buy/sell these on a stock exchange. Eg: A company needs $1m to expand, so it will issue a million $1 bonds, and (normally) pay you x% interest ("coupon") either quarterly or semi-annually. Buying and selling these bonds, you can get them at a discount to face value, eg: $0.90 each, or at a premium, eg: $1.10 each. Once you own them, you receive interest, and then at the maturity date, the company pays you the $1 back (unless you've sold it before then). Bonds call also have a couple of different flavours, such as being "convertible" (ie: you can convert them to stock in the company).
Here's the info on the bond I bought: (well, I don't own it until the order is executed)
Company: deals in minerals and mining.
Current market price: $0.86.
Face Value: $1
Coupon: 10.5% quarterly (next coupon June 30)
Maturity: Sept 30, 08.
Before I go ahead, how much do you think this bond is worth?
This is a bond which has a low trading volume, and currently has a lot more sellers than buyers so I put in a bid of $0.60 per bond (remember that each one is a $1 bond which matures in 4 months).
I am one of only 6 buy orders, and one other also has an offer of $0.60. The market has been open for about 2 hours now, and the order hasn't been executed yet. I'll have to wait and see. I might be too optimistic with my price, but if I get it, it's a super-bargain.
Daniel.
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