Co-op Group 11% 2025 - half way mark

[zico]

Can anyone explain to me why the price of these isn't higher?
Currently the buying price is £103.55. They expire in Dec 2025 at which point they are worth £100 - yes?
But they pay 11% per year, so anyone buying them now at £103.55 would also get £11 in the next year.

I'm sure there must be something wrong with my reasoning, but grateful if someone could explain it!

As a side-issue, are there any particular pros and cons to selling 14 months before expiry as opposed to simply letting them expire?
(I do appreciate that one reasonable answer might be that I shouldn't have money in investments I don't fully understand!)

[GoSeigen]

Can anyone explain to me why the price of these isn't higher?
Currently the buying price is £103.55. They expire in Dec 2025 at which point they are worth £100 - yes?
But they pay 11% per year, so anyone buying them now at £103.55 would also get £11 in the next year.

I'm sure there must be something wrong with my reasoning, but grateful if someone could explain it!

You're possibly confusing bid and offer price but I haven't personally checked the offer, if it's indeed offered at the same price as the bid or even backwardated then they must be a decent buy. I'd check the news though because I seem to remember there being something about Co-op group recently...

As a side-issue, are there any particular pros and cons to selling 14 months before expiry as opposed to simply letting them expire?
(I do appreciate that one reasonable answer might be that I shouldn't have money in investments I don't fully understand!)

If you consider the price to be illogically low then why would you want to sell them early? Surely they would be a hold or buy? So the obvious answer to your question is you'd be getting a bum deal...


GS

[Alaric]

Ca
Currently the buying price is £103.55. They expire in Dec 2025 at which point they are worth £100 - yes?
But they pay 11% per year, so anyone buying them now at £103.55 would also get £11 in the next year.

Would there not be an interest payment due December 2024 as well? But watch out for whether the price quoted includes the right to the next interest payment or would be adjusted upwards (accrued income) to allow for this.

Someone buying after the December 2024 coupon payment might expect to have to pay £ 110 less whatever rate of return they (or the rather the market) thought appropriate. So if it's 7% that gives a price of 104 to a first approximation.

[Rhinocol]

You will have to pay the accrued on these (roughly three Quarters of the 11% earned since the last pay day) but will get the 11% coupon in December 24., plus a final 11% when the investment is called in late December 2025. Also factor in the dealing costs and stamp duty. I think the 103 price you quote is probably the selling price . My broker is showing 104.20 for purchase. Your 7% is probably about right. Hope this helps

[Surerera]

The offered price is 104.9 which gives a yield to maturity of 6.62% which is what you can purchase them at.

If they were offered at 103.55 the yield would be a juicy 7.76% but regrettably they are not. that is the price you can sell to the market at.