April 22, 2014

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I have had great success in the corporate bond arena, so when I saw this Citigroup bond offering, I jumped at the chance:

Citigroup (C) is offering a 10.50% coupon bond that matures in 2034.  (CUSIP 1730T0G78) but callable in 2015.

So why the high rate?  Well this is a teaser rate that changes in February 2016 but you can collect the high yield for two years.  When the coupon resets in 2016 the formula changes.  Hence the term floating rate bond.

The bond sells for $1000 each.  They are hard to get, so you will need to call your broker, and they will probably have to go out and search the market to see if there are any sellers.  DO NOT PAY OVER $1000 PER BOND.

There are advantages and disadvantages to this investment so ask your broker to describe these bonds, and make sure you understand them to determine if you want to make the purchase.  In terms of risk, unless Citigroup goes belly up (which is almost impossible), you will be ok.

There are additional offerings out there so if the Citigroup is not available, ask your broker for more options.

(With some exceptions, do NOT buy bond FUNDS.  Individual bonds as described above are the best route.)

We like business development companies (BDC) but they are getting hit.  This is not entirely unexpected as the indices are dropping BDCs.

You should be buying BDCs, and you will be very happy six months to a year out.  This story is an excellent recap:


Go here for more thoughts on BDCs.

Link to prior post.


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