I just tossed a coin 3 times and it came up heads twice, so we should be okay.
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Off topic but not sure where else to put this question. Have googled bonds and fixed interest and yield rates but still not sure about the combo data as displayed below
if a company is selling bonds, samples shown below, and the "coupon" is 5.25% (the interest rate they will pay?) , what is the "offer" column with its displayed % ?
Corporate Bonds
Issuer Maturity NZDX Code Coupon Rating Available Offer AIA 28/05/2021 AIA130 5.52% A- ref 3.58 % ANZ 13/03/2019 Not Listed 6.25% AA- ref 2.98 % 25/09/2020 Not Listed 4.03% AA- ref 3.66 % ASB 08/06/2017 Not Listed 6.06% AA- ref 2.40 %
The offer column shows the effective interest rate you will receive by paying the current asking price for said bonds, ie,you are paying a premium to obtain the coupon rate.
Thanks Couta
Seems like a duff deal to me then.
Excuse my total ignorance of these things but cant one simply go direct to the source supplier to obtain the full coupon rate?. Does the process involve a middle-man taking a slice of the action ?
Once listed after issue, you can only buy on the secondary market at the offer price. It works basically the same way as shares, you may get them lower or higher than the coupon rate (IPO price if shares) at any given point in time, but in most cases you will pay a premium.
Yes...that is what I think as well Arc. My advisor wanted a % of my money in bonds. And to buy them on the market. Didn't make sense to me. So I just waited for new issues and bought those so that I did get the coupon rate. The downside was that it took a while to get the appropriate bonds. Also harder to ladder them so they expire at varying times in an orderly way.
Don't want to be picky Couta , however .
Might be better to qualify you will get them lower or higher than the coupon rate depending on current market interest rates . IE Rates go to 8 % a 5 % coupon will be trading at a discount all things being equal.
The rate they trade at will also be governed by the credit rating or solvency of the entity issuing them .