Corporate Bonds

Posts Tagged ‘corporate bonds default rates’

Question: What is the yield on this 5-year corporate bond?

A 5-year Treasury bond has a 5.2 percent yield. A 10-year Treasury bond yields 6.4 percent, and a 10-year corporate bond yields 8.4 percent. The market expects that inflation will average 2.5 percent over the next 10 years (IP10 _ 2.5%). Assume that there is no maturity risk premium (MRP _ 0), and that the annual real riskfree rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities: DRP _ LP _ 0.) A 5-year corporate bond has the same default risk premium and liquidity premium as the 10-year corporate bond described above. What is the yield on this 5-year corporate bond?

Answer: around 5

Are falling corporate bond default rates good for bondholders?

Question: Will the Government default on Northern Rock Corporate Bonds? What's your opinion?

http://www.selftrade.co.uk/quote.php?symbole=4uENR0

Answer: I think that is extremely unlikely, the government has not had any problems selling bonds despite the financial crisis and the reason for that is that the institutions buying them are very confident they well get their money back.

Government borrowings are very high, but not at such a level that would be considered unsustainable - this is one reason why the states credit rating has not been downgraded.

In-Depth Look - Corporate Bonds Raring for a Rebound