Bonds - Corporate vs Treasury

Lero Labs / Mktg
lyVd32

Lero Labs Mktg

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Aug 18, 2018 26 Comments

I’m trying to get some higher interest within the next year. I see that US treasuries are the safest for return of principal. What about corporate bonds from companies like Goldman Sachs, JP Morgan, GE, Wells Fargo, BoA, Microsoft? They all seem to be investment grade bonds according to Moody‘s and the S&P. They are all maturing within the next year. What is the chance that I lose my principal if I buy these corporate bonds?

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TOP 26 Comments
  • Google / Mktg QuadLovin
    What is the rate of interest differential between treasuries and Corp bond maturities?
    Aug 18, 2018 8
    • Lero Labs / Mktg
      lyVd32

      Lero Labs Mktg

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      OP
      Coupon rates is what I meant. Not yield to maturity.
      Aug 18, 2018
    • eBay CEbi00
      What is the difference between coupon rate vs yield to maturity . How do we figure out which bonds are maturing or expiring ?
      Aug 19, 2018
    • Lero Labs / Mktg
      lyVd32

      Lero Labs Mktg

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      OP
      The expiry date is given on the bond. All of these are expiring within the next year.
      Aug 19, 2018
    • Goldman Sachs blindf01d
      Look at yield to maturity not coupon
      Aug 21, 2018
    • Goldman Sachs blindf01d
      You are only going to get the yield... If coupon >yield, you would have to pay a premium to buy the bond
      Aug 21, 2018
  • Google liam
    T bills seems to be a good alternative to money market accounts to temporary park cash. Buying long term bonds (with potential rate hike) or getting corporate risks exposure doesn't look like a good idea.
    Aug 18, 2018 9
    • Citibank Ilsn45
      Neither are liquid by definition. Compare term to rate and there you have it.
      Aug 18, 2018
    • Lero Labs / Mktg
      lyVd32

      Lero Labs Mktg

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      OP
      I plan on holding these two maturity. That’s why I said one year or less. Most of these are expiring no later than August 2019. In fact some are expiring in February and April. Some coupon face values are five, six, and 8%, while others are about 2.5%
      Aug 18, 2018
    • Citibank Ilsn45
      Risk premium. Bonds are complicated so I’d leave the evaluation process to a pro. I’d go conservative since you’re looking for principal protection
      Aug 18, 2018
    • Lero Labs / Mktg
      lyVd32

      Lero Labs Mktg

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      OP
      What do you mean by “risk premium“? Do you mean the probability that I won’t get my principal back? Should I just get treasuries instead of corporate bonds then?
      Aug 18, 2018
    • Citibank Ilsn45
      Lower rate bond = higher risk of loss of principal, therefore higher rate to compensate for risk. Treasuries are considered risk free since they’re backed by the the government so they pay the lowest rate called a risk free rate. Triple A bonds are the next safest bet but no implied guarantee but slightly higher rate, so on and so on until you get to junk rated bonds. Highest rate along with hugest risk of default. That’s quant land and that’s where the big buys and girls play to make and lose millions.
      Aug 18, 2018
  • eBay CEbi00
    Tax free municipal bonds payout is less than if you directly buy bonds and pay tax .
    Aug 19, 2018 1
  • Amgen cld-arch
    Bonds for safety, stocks for growth... stick with treasury or tips. Match duration to when you’d need the money.

    Edit: Or tax free munis I’d high tax bracket
    Aug 18, 2018 1
    • Google / Mktg QuadLovin
      True, if you can find munis with yields closer to 4%. Otherwise a AAA Corp bond with 6% yield gives you 3.5-4% yield after tax.
      Aug 18, 2018
  • Citibank Ilsn45
    You need to look at duration in addition to rating. Also, you can lose money in bonds in a rising rate environment unless you’re buying individual bonds and holding to maturity. Prices and rate move inversely.
    Aug 18, 2018 1
    • Lero Labs / Mktg
      lyVd32

      Lero Labs Mktg

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      OP
      I won’t be buying bond funds. These are individual bonds only
      Aug 18, 2018
  • Apple dkEY38
    Your chances of losing your principle within the next year are low with both treasuries and corporate bonds (except for higher yielding issues from unstable companies).

    But if you’re like most people here with high TC, you don’t want either. You want to be in tax free municipal bonds. After taxes, the risk-adjusted return is much higher.
    Aug 18, 2018 0