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More dabbling in corporate bonds

Regular folks are being wooed by high yields on corporate bonds because enticing spreads between corporates and Treasuries. Typically institutional investors buy up nine-tenths of corporate bonds.

Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago, says investors who want to take the plunge on individual bonds should select companies that seem best-positioned for hard times.

He singled out Caterpillar Inc., among others, as a “pretty good credit” despite declining demand for its heavy equipment in a global recession. As of Tuesday, a 10-year Caterpillar corporate bond carried a 6 percent yield — more than double the 2.80 percent yield of a 10-year Treasury.

Things to keep in mind: High yield reflects low prices; low prices reflect low demand; low demand reflects perception of higher risk.

Here’s an e-how article on how to buy corporate bonds.

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Tom Mangan posted at 7:34 am February 4th, 2009 |

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