Wednesday, November 01, 2006

Mais OUI, bien sur!

Trying to find an exchange-traded debt security (or a pseudo-debt security, like some preferred stocks) to balance out my portfolio is not easy these days. There are some preferreds based on closed-end funds, such as GAB-D, GUT-A, and RVT-B which look good if one considers that in the medium term, interest rates are probably on their way down. I also did well from their predecessors' being called, and these will be callable shortly. But how will they behave if there's a recession, or some similar blowout? I don't know, so I don't want to add to my holding in them right now.

There are also some good longer-term debt securities, but most of them are in one way or another in danger if derivatives or asset-backed securities blow up. And, once again, I don't know how long-term bonds are going to behave if there's a major recession.

I finally settled on OUI, which I should be able to hold until it matures in another two years; if so, it at least gives a very predictable yield. It's rated only BBB, but a more detailed look at the company suggests that it will most likely survive for another two years, and at the price I paid for it, gives a yield to maturity of about 5.6%. That's not so bad, when a two-year Treasury Note is yielding about 4.9%, and a two-year CD a little more.


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