Tuesday, December 26, 2006

PINES and QUIBS and PD's Oh My! Minibonds Anyone?

Have you ever considered Minibonds(TM) for an income portfolio or your retirement plan? These are bonds that are traded just like stocks on the New York Stock Exchange or American Stock Exchange for around $25 per share. They are almost like preferred stocks except that they pay interest instead of dividends and they usually have a specific maturity date. Sometimes they are referred to as PINES (Public Income Notes) or QUIBS (Quarterly Interest Bonds) or QUICS (Quarterly Income Capital Securities) or QUIDS (Quarterly Income Debt Securities). There are even a few that are issued as Perpetual Debt, which means that there is no maturity date.

The advantages of Minibonds to the issuers are that the interest is deductible to the corporation (unlike dividends which are not deductible).

The advantages to the investor are first, that the bonds are 'safer' than preferred stocks (in other words, if the corporation goes out of business, the bonds are generally paid off first before the preferred or common stock). Second, the Minibonds (with the exception of the perpetual debt bonds) have some limited protection against inflation versus preferred stocks in that if interest rates go up after purchasing them, their value will drop, however the par value (usually $25) will be paid back at maturity. Whereas, preferreds have no maturity. The third benefit is the small denomination, especially when looking at a $2,000 IRA investment. A fourth benefit is that since they are traded like stocks, there is more liquidity than buying or selling a $5,000 bond. However, these are still very illiquid investments. Most have a very low daily volume.

Here is a list sorted in order of current yield:

General Motors 7.5 GMS 9.8%
General Motors 7.375 HGM 9.7%
Genl Mtrs Corp Sr Notes BGM 9.6%
General Mtrs 7.25 Notes RGM 9.5%
General Motors 7.25 XGM 9.4%
Gen Motors 7.25 QUIB GMW 9.4%
Great Atl. & Pac 9.375 GAJ 9.2%
Ford Motor 7.6% Notes FCJ 8.3%
A M R Corp 7.875 Pines AAR 8.2%
Converium Fin 8.25 CHF 8.1%
PMA Cap 8.5 Sr Notes PMK 8.1%
Provident Fin Sr Notes PFV 8.0%
Aquila 7.875% QUIBS ILD 7.8%
Realty Income Corp 08 OUI 7.8%
Delphi Fin 8.0 Sr Notes DFY 7.8%
Northern Sts Pwr 8.0 XCH 7.8%
Hilton Hotels 8% QUIBS HLN 7.8%
Stilwell 7.875 Pines SVQ 7.8%
GMAC Llc 7.35 Sr Notes GJM 7.6%
GMAC Llc 7.375% Note GOM 7.6%
Telephone & Data 7.6 TDA 7.5%
GMAC Llc Pines GMA 7.5%
GMAC Llc 7.25% Notes GKM 7.5%
Entergy Louis. Hldgs 7.60% EHL 7.4%
AAG Hldg 7.5 Sr Deb GFW 7.4%
Phoenix Cos 7.45QUIB PFX 7.4%
Natl Rural Util 7.40% NRS 7.3%
Forest Cty Ent. Sr Notes FCY 7.2%
Cons Ed 7.25% Pines EPB 7.1%
AAG Hldg 7.25% Deb GFZ 7.1%
ING Groep Perp Debt INZ 7.1%
Entergy Mississ. 7.25 EMO 7.1%
AT&T Inc 7% Pines SBT 7.0%
ING Groep Perp Debt IND 6.9%
SLM Corp Lkd Notes OSM 6.9%
American Finl 7.125 AFE 6.9%
Finl Sec Assur 6.875 FSB 6.9%
General Mtrs Deb C GPM 6.8%
Telephone & Data Sys TDI 6.8%
Hsbc Fin Corp 6.875 HTB 6.7%
Natl Rural Util 6.75 NRN 6.6%
ENTERGY Arkansas 6.70% EHA 6.6%
Duquesne Light Pines DQC 6.6%
Genl Elec Cap Pines GEA 6.6%
Bank Of Am Corp 6.5% IKJ 6.4%
General Mtr Cv Dbs B GBM 6.3%
Finl Sec Assur Notes FSE 6.2%
Natl Rural Ut Sub Notes NRC 6.2%
Natl Rural Ut Sub Notes NRU 6.2%
Ford Motor Credit 7.375% FCZ 6.2%
SLM Corp Sr Notes JSM 6.1%
AMBAC Fin 5.875 Deb AKT 6.1%
Gulf Power 5.875 Snr GUQ 6.1%
AMBAC Finl 5.95 Debs AKF 6.1%
HSBC Fin Corp 6.0 Notes HTN 6.1%
ING Groep Perp Debt ISP 6.1%
General Elec Cap 6.1 GEC 6.0%

Services and products referred to herein are trademarks, registered trademarks, servicemarks, or registered servicemarks of their respective trademark or servicemark owners. Author owns one of the General Motors notes.


Unknown said...

I know this post is old but I looking for more info on this subject. IS this a buy time to buy these investments and can I buy them through online trading like etrade or scottrade? Not sure how else to contact you, but this is the most informative article I have found even though it is from a while back.

Stockerblog said...

Yes, you cn buy these through most online brokerage firms. I jut updated the article here: