Bond Coupons

Discussion in 'Prop Firms' started by chitowninvestor, Jun 2, 2010.

  1. I have a little over a $1 million in AA rated, corporate bonds with a high yield, maturing in about 10-yrs. I was told I can sell the coupon interest rate on these bonds while still holding the principal bond.

    What is the market for selling off the coupon interest rates from my corporate bonds and what are sources to consider?
  2. I don't think it would be really worth it, unless you are in a present day cash crunch perhaps.

    It sounds like you bought a chunk of high quality corp bonds at the right time, possibly in 2008.

    I ran a present value calculation for you. Eventhough you have a high yield, whats most pertinent is the face value and overall average coupon interest amount for this calculation.

    Depending on when you bought all these notes, your average cost could be 60 cents on the dollar or less or more. So potentially your annual yield is 15%+- range.

    But for my calculation I figured $1M face with 6% average coupon interest rate, or $60K annual income stream over 10 year period.

    The present value would be $463,304, while in actual payments you would receive $600,000 over the time period. And that does not factor in compounded reinvested principle. It would be higher.

    Anyone willing to step in here would most likely grossly lowball that present value number.

    If you need to pull some cash, you would be better off going with a broker like IB who has super low margin borrowing rates. You would get something like a 1.5% rate and put some of those notes on margin and just take out available cash against it.

    I would also bet that most of your notes are now trading at or above par levels so you have allot of equity in there, close or at the $1M face amount.