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Cororate Bonds - what's not to love?
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Micawber
Posted: 13 February 2025 10:20:25(UTC)
#11

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I don't know enough about corporate bonds to be able to assess them individually, but I am content to rely on collective investment vehicles that use them along with other bonds etc. to generate income. In the times when yields are comfortably above inflation, and when interest rates are less likely to increase than decrease, and/or when equity markets are at 'record highs' and volatile, I see merit in bond funds and the like. I currently hold BIPS.
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AlanT on 13/02/2025(UTC), dlp6666 on 13/02/2025(UTC), ANDREW FOSTER on 14/02/2025(UTC), Lemanie on 14/02/2025(UTC)
Tom 123
Posted: 13 February 2025 10:34:23(UTC)
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Equity like returns during equity drawdowns, i.e. too correlated.

Better of with sovereign debt / gold if you want to diversify and be truly uncorrelated.

Ok to have some but not a great diversifier.
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dlp6666 on 13/02/2025(UTC), The Penguin on 14/02/2025(UTC)
D Barnes
Posted: 13 February 2025 17:56:59(UTC)
#13

Joined: 26/02/2015(UTC)
Posts: 37
An earlier response mentioned 3% - 4% typical returns, with credit risk and equity-like volatility. I wondered if anyone has considered the likes of this:

https://www.hl.co.uk/sha...s/s/segro-plc-5.75-2035

SEGRO represents a very low credit risk, but on the face of it gives a 7.6% YTM. The 2035 redemption date may not be for everyone, but it represents more than 6% after 20% tax, noticeably better than any Gilt I'm aware of. A small amount of research suggests there are other similar candidates.

Would this, and similar Corporate Bonds, not be a good substitute for Gilts where the buyer is happy to hold to redemption?
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D Bergman
Posted: 14 February 2025 10:14:29(UTC)
#16

Joined: 22/03/2018(UTC)
Posts: 1,308
D Barnes;334269 wrote:
An earlier response mentioned 3% - 4% typical returns, with credit risk and equity-like volatility. I wondered if anyone has considered the likes of this:

https://www.hl.co.uk/sha...s/s/segro-plc-5.75-2035

SEGRO represents a very low credit risk, but on the face of it gives a 7.6% YTM. The 2035 redemption date may not be for everyone, but it represents more than 6% after 20% tax, noticeably better than any Gilt I'm aware of. A small amount of research suggests there are other similar candidates.

Would this, and similar Corporate Bonds, not be a good substitute for Gilts where the buyer is happy to hold to redemption?



I must be missing something but I don't understand the YTM.

The coupon is 5.75%, and with the current price the effective interest rate is 5.45% approximately.
So how would we receive 7.6% even if held to maturity?

Can you explain?
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Thrugelmir
Posted: 14 February 2025 10:48:57(UTC)
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D Barnes;334269 wrote:


SEGRO represents a very low credit risk, but on the face of it gives a 7.6% YTM.




Think you are misreading the HL page. Click on modified duration and you'll get an explanation of what it means.
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D Bergman on 14/02/2025(UTC)
what me worry?
Posted: 14 February 2025 16:44:53(UTC)
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Having been burned by individual bonds eg. WASPS and EROS, I wouldnt touch individual companies.
However, In the ISA the likes of NCYF and BIPS are basic staples for me and have held and added to over a good number of years. Currently running at about £150k in total (there was another that went on to form part of BIPS (CMHY)). They dont move about much but they have been good reliable payers and its the level of income that is the driver. Also hold royal london sterling bond at a much smaller level of around £20k.
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ANDREW FOSTER on 14/02/2025(UTC), Andrew59 on 14/02/2025(UTC), Mr Bean on 15/02/2025(UTC), Keith Short on 07/03/2025(UTC)
MarkSp
Posted: 14 February 2025 17:48:19(UTC)
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what me worry?;334416 wrote:
Having been burned by individual bonds eg. WASPS and EROS, I wouldnt touch individual companies.
However, In the ISA the likes of NCYF and BIPS are basic staples for me and have held and added to over a good number of years. Currently running at about £150k in total (there was another that went on to form part of BIPS (CMHY)). They dont move about much but they have been good reliable payers and its the level of income that is the driver. Also hold royal london sterling bond at a much smaller level of around £20k.


I would suggest splitting up that holding and try CVCG, TFIF as well. They are all different with different risk profiles. NCYF is probably the weakest.

the are some decent Corporate Bond ETFs too

IGCB and JHYP are two I hold
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4 users thanked MarkSp for this post.
Sheerman on 14/02/2025(UTC), Andrew59 on 14/02/2025(UTC), Newbie on 14/02/2025(UTC), Keith Short on 07/03/2025(UTC)
D Barnes
Posted: 14 February 2025 18:55:12(UTC)
#15

Joined: 26/02/2015(UTC)
Posts: 37
Thrugelmir;334347 wrote:
D Barnes;334269 wrote:


SEGRO represents a very low credit risk, but on the face of it gives a 7.6% YTM.




Think you are misreading the HL page. Click on modified duration and you'll get an explanation of what it means.



Yes, quite right. Apologies, I've only come across the term in relation to holding Gilts to redemption. Thanks for the clarification
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