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Investment advice on high coupon bonds and callable risk
The reader holds about 37 000 dollars in A or better bonds yielding around 8 percent and worries about redemption at below market price. The advisor says high coupon bonds are already priced with redemption risk, and switching to lower coupons or preferreds offers no clear benefit. For example Philadelphia Electric 9s yield 7.95 percent current, 7.74 to maturity, while Bell Telephone 6 1/4s yield 7.21 percent current, 7.25 to maturity. Switching to high-yield preferreds risks call at about eight points below market. tax considerations and future E bonds are discussed. The advisor doubted the bond offer, notes top-quality bonds yield around 7/8 percent and cautions against rushing a one-week decision.
MENTIONED IN THIS ARTICLE
Philadelphia Electric
Bell Telephone
Bell
Public Service Electric and Gas