CD Alternative--5y Bond Ladder

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exUBS's picture
Joined: 2009-04-23

I have had some success in showing 5y corp bonds ladders as an alternative to low CD rates. 
I position a ladder as a way to achieve 4-5% income, and have funds coming back to the buyer each year to retain flexibility.  I also offer to create a monthly income portfolio if desired.
I use A or better rated corporates, with maturities ranging from 2-5y.  Coupons and yields range from 3-6%, with an average portfolio yield of 4-5%.
The names that I generally use are GE, CAT, HSBC, WFC, NRU, GS and sometimes C, and BAC.
If we get into the details of how the ladder works and what the underlying investments are, I discuss credit ratings and the lack of FDIC insurance.
Any thoughts ?
Thanks !

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