As I often do, on Monday afternoon, I went searching for corporate bonds with attractive yields and maturities. Typically, if I am scrolling through inventories of bonds, I first focus on yields and maturities that catch my eye and then, after making a list of several bonds, turn my attention to credit risk. On Monday, my focus was on intermediate-term corporate bonds with yields-to-worst and current yields of at least 4%, maturities of less than 10 years, credit ratings no lower than Ba3/BB-, and prices under 100 cents-on-the-dollar. I came across 171 CUSIPs that fit the criteria.
It has been about six weeks since I last shared the results of a bond screen. In that article, “12 Bonds With Attractive Yields and Maturities,” I mentioned 12 different companies and CUSIPs, all of which again showed up in my latest search. Even though I think each of the companies mentioned in the previous article are worth exploring further to see if their risk-reward profiles fit your investment objectives, in this article, I would like to share a new group of companies. Before I share the list, I would like to emphasize that I do not yet own any of the CUSIPs I am about to mention. I also do not yet own any other bonds of the companies that appear on this list (I do own the common stock of Computer Sciences). The companies on the list are simply some of those that passed my first test, the yield/maturity test, and that I find of interest.
In no particular order, here are the results of my search:
As I write this article, the 10-year U.S. Treasury is yielding 2.60%. Since 2.60% is nowhere near the minimum I am willing to consider for an investment in a 10-year Treasury, I’ve turned elsewhere in search of yield. Even though yields on a market-wide basis are certainly well below levels at which they’ve historically traded, you might be surprised by the yields/maturities/credit risk profiles that currently can be found in the corporate bond market.
One of the keys to building a diversified portfolio of individual bonds is to keep looking. If today’s list of bonds doesn’t pique your interest, there may be others that will in the near future. Building a diversified portfolio takes time. I routinely screen hundreds of bonds, end up with a handful to a dozen that pass my yield/maturity test, and then zero that pass my credit risk test. Other times I will find a couple of CUSIPs that make it through the process, add them to my watch list, and turn my attention to building a position. The bottom line is: It takes time. But the reward for that time and effort is a carefully selected, diversified portfolio of individual bonds that is specifically tailored to your risk tolerance and investment objectives. From my perspective, that is hard to beat.
On a closing note, please keep in mind that this article is for informational purposes and that only you can decide if taking the counterparty risk of investing in individual bonds is right for you.