Co-op Group 11% 2025 - half way mark

[Laughton]

Short answer - yes.
Both paid into my idealing account on December 20 2021.

[Wozzitworthit]

HL paid our 42TEs on 20th December 2021 - but there was no sign of the 42TF payment

I chased them on 30 December 2021 and we received those on the same day (as a rteurn of capital under transactions and not as income)

Woz

[carnie]

Thanks both,

I will chase ii.

C

[carnie]

They had forgotten to claim it on my behalf..

"My colleagues have chased this payment as it was due to us as a market claim. We have now received this and credited your account"

I do hope this would have found its way to my account even if I hadn't chased!

[Shufflew]

For the sake of my question, assume I'm an idiot that used to be a COMPLETE idiot.

I want to balance my portfolio and look at getting some Bonds of high(ish) quality.

Question: Why are they named 11% and this dicussion mentions they actually get your 5%ish. I know there is now a higher price 125ish as opposed to 100(?) starting. But this should work out at 9% yield not 5%.

As stated, asssume I know nothing and keep the langauage as simple as possible please.

Thanks in advance

[Laughton]

The "running yield" is, as you hoped, close to 9% but if you hold to maturity in 2025 then you have to take account of the fact that you will only receive 100p for every bond you've bought for 125p.

That brings the yield to maturity down a lot (I make it a shade under 4%).

[Gan020]

For the sake of my question, assume I'm an idiot that used to be a COMPLETE idiot.

I want to balance my portfolio and look at getting some Bonds of high(ish) quality.

Question: Why are they named 11% and this dicussion mentions they actually get your 5%ish. I know there is now a higher price 125ish as opposed to 100(?) starting. But this should work out at 9% yield not 5%.

As stated, asssume I know nothing and keep the langauage as simple as possible please.

Thanks in advance

The bonds were isssued many years ago when interest rates were much much higher and CO-OP was not in a great place. The bonds pay 11% and will redeem at 100p (par)

Broadly speaking. Spend £10,000. Pay a bit of commission. Get 8,055 bonds at 124p plus pay some accrued interest of around £125. Total cost £10,125

Get back on maturity in 2025 £8,055 (8,055 bonds at £1 each) + £3,544 (8055*.11*4 8,055 bonds at 11% interest a year for 4 years) = £11,599

Broadly make 14.5% over 3 years and 10 months

If you do the maths more precisely and can reinvest the interest the day you receive it I get the return to approx. 4.1% a year. Not great but it's a decent quality issue.

[Shufflew]

I really appreciate the help and the breakdown to my level.

I have played round and see that it's now 4%(ish) a year.

My next question (this could get boring quick):
I thought that the coupon rate of 11% is the yield at par (100), so then I thought taking into account the price currently at 125 would reduce the 11% to 9%..... however I'm obviously missing something as to why people say the yield is 9% as above, and not the 4% you showed me.

Sorry to bother you, I normal pester HL on the phone, but they know the name of everysingle employee and shareholder of a stock but with bonds they dont even have all the par prices, any useful dates etc. I feel confused why stocks are in thing and people have turned their back on bonds, and also why they are so much less regulated. I feel the recent bull market and low interest rates could be the answer (but refer to point 1 on my original post).

Thanks again

[GoSeigen]

I really appreciate the help and the breakdown to my level.

I have played round and see that it's now 4%(ish) a year.

My next question (this could get boring quick):
I thought that the coupon rate of 11% is the yield at par (100), so then I thought taking into account the price currently at 125 would reduce the 11% to 9%..... however I'm obviously missing something as to why people say the yield is 9% as above, and not the 4% you showed me.

Thanks again

The running yield is 9% (actually 8.8% = 11% / 1.25 ). The running yield is defined as annual interest payment divided by price.

The only real use of this number that I know is to get a feel for the effect of income tax on the payments. e.g. If income tax is 20% then you'll be paying 20%*9=1.8% of the capital in tax each year, practically halving your returns. Who in their right mind wants to pay half their returns to the taxman? So stick these in an ISA...

GS

[Gan020]

My next question (this could get boring quick):
I thought that the coupon rate of 11% is the yield at par (100), so then I thought taking into account the price currently at 125 would reduce the 11% to 9%..... however I'm obviously missing something as to why people say the yield is 9% as above, and not the 4% you showed me.

Thanks again

I think it might be that you are confusing bonds with preference shares or PIBS? With bonds I don't think people talk about running yield at all. I certainly don't. I'm interested in the yield to maturity (YTM)

With preference shares and PIBS these are perpetual, (i.e. have no maturity date or only have a maturity date under specific circumstances) so people talk alot about running yield as they see this as a good metric. It has it's value but of course ignores gains or losses from the security going up or down in price.

[Shufflew]

Thanks again for the replies. I think I worked this out last night regarding the yields, it wasn't as nice as sleeping but it served a purpose, both your replies confirm I was right in Hargreaves Lansdowns so called "yield" being the Coupon rate adjusted to the price being over par but not accounting for settlign at maturity also over par. It all makes sense now.

I think I am going to buy them, in a stocks and shares ISA. Its like Jose Mourinho once said "A pianist gets great playing the piano, not running around it doing 1 finger press ups.'.

Wish me luck

[hiriskpaul]

2021 Results are out https://www.londonstockexchange.com/new ... t/15403436

Full report here https://www.co-operative.coop/investors/reports

A four word summary, Profits down, debt up. Nothing alarming to bondholders though as far as I can see.

[mark85]

Hi,

Have come across these bonds as one of the most popular on ii. I have to say that I have very limited knowledge on bonds, so please excuse my ignorance but seem at the moment they would give a good return?

Say I was to buy £10,000 worth of these bonds - current price is £1.0513.
ii uk bond purchase fee £40. £1.0513 bond price will get approx 9512 bonds.
Maturity 2025 (9512 x £1) + interest (9512 x 0.11 x 2) = £9512 + £ 2092.64 = £11,604.64
Approx 16% over 2 yrs 3mths

Roughly works out at ~7.1%

I've probably made an error somewhere but if its around right would pay out reasonably?

Many thanks for any help. If anyones aware of higher paying out bond to have look at that would be great too.

Thank you!!

[Holts]

Say I was to buy £10,000 worth of these bonds - current price is £1.0513.
ii uk bond purchase fee £40. £1.0513 bond price will get approx 9512 bonds.
Maturity 2025 (9512 x £1) + interest (9512 x 0.11 x 2) = £9512 + £ 2092.64 = £11,604.64
Approx 16% over 2 yrs 3mths

Roughly works out at ~7.1%


You can’t buy these by value only in multiples of 1000 I think it is , have you accounted for the accrued interest you will pay on purchase . These pay out once a year in December .

[Gan020]

Say I was to buy £10,000 worth of these bonds - current price is £1.0513.
ii uk bond purchase fee £40. £1.0513 bond price will get approx 9512 bonds.
Maturity 2025 (9512 x £1) + interest (9512 x 0.11 x 2) = £9512 + £ 2092.64 = £11,604.64
Approx 16% over 2 yrs 3mths

Roughly works out at ~7.1%


You can’t buy these by value only in multiples of 1000 I think it is , have you accounted for the accrued interest you will pay on purchase . These pay out once a year in December .

As Holts says you have omitted the accrued interest you pay on purchase. You get three coupons. They are available in single units.
Purchase price of £10,751 (which includes the accrued interest) gives you 9,474 bonds
Maturity 9,474 + (9,474 x 0.11 x 3) = 9,474 + 3,126 = £12,600

Run it through a proper calculator, which I haven't been bothered to do and you'll get something just north of 8%

[Redhill]

Using price of 105.13, I get a GRY of 8.3%.

[Wozzitworthit]

Using Excel XIRR and ignoring dealing costs I get a Yield to Maturity of 8.38%

Edit - posting at same time, not trying to outgun above !!

[Holts]

One other point , II used to let these deal online and in common with many online brokers they have decided to ensure you can no longer do so , when you phone through if you advise there is no route found then they will charge you only the online brokerage . How much that is a hard and fast rule I don’t know but seems to work .

[Redhill]

Using Excel XIRR and ignoring dealing costs I get a Yield to Maturity of 8.38%

Edit - posting at same time, not trying to outgun above !!

Fair enough! I actually got 8.33% excluding cots but rounded down.
I didn't use XIRR but my own formula which probably explains the difference (pleased at least it was within striking distance of the excel formula).

[Redhill]

One other point , II used to let these deal online and in common with many online brokers they have decided to ensure you can no longer do so , when you phone through if you advise there is no route found then they will charge you only the online brokerage . How much that is a hard and fast rule I don’t know but seems to work .

For information, my last purchase of these (November 2022) was through HL and they dealt online at their usual dealing cost.