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Assured Guaranty Ltd. Message Board

  • bottomsupinvestor bottomsupinvestor Mar 21, 2011 12:06 PM Flag

    OT: Question for Mini Bond Guys

    I am thinking of diversifying a little more into variable/floating rate securities. Any advice or leads???

    I am already into the SLM issues of ISM / OSM and they seem to be a reasonable choice unless there are other opinions.

    I have also noticed that there are a number of preffered stocks with a floating rate but the dividends are not accumulative. If that is the case, I really don't understand the signifigance of the stated floating rate since the company doesn't really have to pay it anyway. Am I thinking of this correctly or can someone further explain???

    Thank and I hope you all are doing well.

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    • Bottomsup,

      I went back to this thread and believe you hit the nail on the head when you said "I would think they would hold their value better than the fixed issues at this point."

      I believe that while there may be some appreciation in prices for floating rate issues when interest rates rise, capital losses will be minor, if any, on an aggregate basis when owning several floating rate issues. As I see it the primary purpose of owning this type of bond is to preserve capital. Decondly, the income stream will not decline, but rise while you ride out the interest rate storm without any impact on your standard of living. Should you need to raise cash for some contingency you'll have the advantage of selling those bonds that have no capital loss. This is the real advantage of owning individual securities versus a bond fund which can decline because of forced redemptions.

    • Just came across your post here (been outta town). In the event you've haven't seen all of these, I've got a list I watch periodically through Yahoo F that is just "variable" and a few that are currently fixed, but start using variable rates at some time in the future. No great deals here these days, but once in awhile can take advantage of some market event.

      I also sold off my ISM & OSM during "crisis" and didn't come back, but bought several of the others, including AEB... all in Yahoo format.

      AEB BAC-PE BML-PG BML-PH BML-PJ BML-PL C-PN DFP FNM-PS GS-PA GS-PC GYB HBA-PD HBA-PF HBA-PG ISM JPM-PB JPM-PZ MET-PA MS-PA OSM PNC-PL PYT PYV SLM-PB STD-PB STD-PF UBS-PD USB-PH ZB-PA

      • 1 Reply to jimpersonett
      • Thanks for the info Jim. A number of those were not on my list. Some others include GJP GEP GJR GJS GJT GJP PKF SCEDN STI-PB.

        I agree with you in that there are no significant bargains out there. If rates increase, I don't know if the share price would increase, but I would think they would hold their value better than the fixed issues at this point.

        Thanks again and I hope you had a good trip!

    • Diversify into SLV and GLD ... they don't pay a thing... but staying in the dollar will Cost you BIG this year!

    • Most floating rate issues are not cumulative, but there are some that are such as GYB or AEB as examples. THE quarterly payment only changes if it exceeds some stated benchmark such as the LIBOR rate or US Treasury rate plus some percentage as defined in the prospectus. Otherwise, it stays the same. You'll need to look at the prospectus of each one to see under what circumstances the floating rate is triggered.

 
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