I’ve been paying attention to bonds more so than usual lately, and even picked up a couple of TIPS. Here’s a piece in Barron’s this week about so-called Baby Bonds, now paying 7% or thereabouts.
https://www.barrons.com/articles/baby-bonds-7-percent-yields-investment-grade-6e954fca
Why High-Yield Baby Bonds Offer Income Investors a Rare Opportunity
Key PointsAbout This Summary
- Corporate Baby Bonds from well-known companies are offering yields of 7% or more, near their highest levels in more than 15 years.
- Baby Bonds have a face value of $25 each and trade like stocks on the NYSE or Nasdaq, providing transparency and liquidity.
- A risk for Baby Bonds is their long maturity dates, which often stretch beyond 30 years and make them highly rate sensitive.
From the article:
How does 7% or more sound to you?
Have a look at an obscure corner of the corporate bond market that is offering high yields and good credit quality.
These securities—known as Baby Bonds—come from well-known companies such asAT&T, Ford, Southern Co., and Prudential Financial, and they’re offering yields of 7% or more.
In fact, yields on the babies are near their highest levels in more than 15 years, with many bond prices hitting new 52-week lows recently. They offer rates that are comparable to junk bonds but with higher credit quality.
They’re known as Baby Bonds because their face value is $25 each, as opposed to the standard $1,000 face value of corporate and municipal debt. One nice feature of Baby Bonds is that they trade like stocks on the NYSE or Nasdaq. That means transparency and liquidity.
Of course with interest rates poised to rise this may be exactly the wrong time to lock in such long term things, and they are generally callable after 5 years so if things go the other way and you have a fabulous deal it probably won’t last, but 5 years is almost a lifetime away these days.
Available on the OTC bond market.