KEY POINTS: Premium Bonds: Hold value better Partial return of premium with interest payments Can be sold at a profit More likely to be called before the maturity date Reinvestment risk in low interest rate scenario Discount Bonds Preferred by retail clients, along with par bonds. Lower cash flow, but interest payments may be only interest due. [...]
Pricing TIPS is a Chess Game
Question: If the big reason for the appreciation in TIPS is that they are institutionalized and that buyers-have bid up the price based on general U.S. T-bond levels (rather than inflation alone, then it might be wise to sell them. Is this the whole story? What are the factors in pricing TIPS? Answer: There are at least [...]
Concerned about Inflation? What about TIPS (Treasury Inflation Protected Securities)?
Buying Considerations Many investors are sure that higher inflation and higher interest rates are right around the corner. As a result we have had a number of inquiries as to whether, in 2012, a bond investor should buy Treasury Inflation-Protected Securities (TIPS). Investors like the idea of TIPS because they will appreciate if there is [...]
Like Water, Like Cash Flow
By Stan and Hildy Richelson November 22, 2011 There are two times in a man’s life when he should not speculate: When he can’t afford it, and when he can. —Mark Twain Like Rodney Dangerfield, bonds get no respect. Their advantages of predictable growth and cash flow are woefully underappreciated. Like our [...]
Ditch the Casino of Hope and Fear
Part of our behavioral makeup is making financial decisions based on inaccurate or incomplete information. For example, suppose you were offered two investment choices: a volatile investment that might return 10 percent or more per year; or a more conservative investment returning 4.5 percent per year. Both might not meet your future retirement needs. Which [...]
Pay premium price for high coupon high quality bonds?
You want a good return on your high quality bonds, but wonder about the wisdom of paying premium prices for bonds that carry coupons of 4.5-5.5%. Here are our thoughts about the pros and cons of premium bonds that we shared with one of our clients: Question: “Please discuss buying bonds at a premium in the [...]
Why Some Moral Obligation Bonds are Like Farm Raised Atlantic Salmon
The word moral means the rules of right conduct. Municipalities issue moral obligation bonds, which have a specific definition in the law. According to Black’s Law Dictionary, a moral obligation is “a duty which is valid and binding in conscience and according to natural justice, but it not recognized by the law…”[i] Many people purchase [...]
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Like Water, Like Cash Flow
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Pricing TIPS is a Chess Game
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Pay premium price for high coupon high quality bonds?
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Why Some Moral Obligation Bonds are Like Farm Raised Atlantic Salmon
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Premium or Discount Bonds? That is the Question
