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Update Discounted Bonds

A good till canceled order cleared today.

music selection:  “Yesterday, Today, Tomorrow” — Mike & The Mechanics

There hasn’t been much to report in my speculations into deeply discounted bonds.  The risk premium is at record lows with the junkiest of debt only paying a few points more than Treasuries.  I’m not a buyer right now.  One of my existing positions finally sold though.

On 9SEP2016 I bought two units of AOI 9.875 coupon 15JUL2021 maturity bonds.  I paid 88 cents on the dollar plus 4 dollars in commissions and 32.37 in accrued interest.  Today I sold for 95 cents on the dollar, paying 9.75 in commissions.  I collected 197.52 in coupons in the holding period.  The trade was in force for 489 days and yields 12.11% annualized (15.3% gross).

I consider that an excellent return for such a low risk investment.  At some point the credit cycle will turn and spreads on risk premium will once again be wide.  That will be time to back up the truck on bonds that are distressed but still well collateralized.

Devour your prey raptors!

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