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Adding Some Transocean Ltd. Bonds

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As we had mentioned yesterday when we wrote we plan to add some $1,000 bonds to the 2015 model portfolio (as well as to our personal account). While we haven’t owned $1,000 traditional bonds in the models before, mainly because of the lack of visible pricing, this one makes some sense to us.

We will add the Transocean Sedco Ltd 2.50% Notes. These are currently available for $91.19 ($911.90) each and we are planning to buy 10 bonds. These bonds mature on 10/15/2017 and have a yield to maturity of 6.057%. This is the attractive part to these bonds–the maturity date. We have noted time and time again about our desire to shorten the maturities–and these work perfectly. Transocean is a huge deep water driller which has been hurt by the weakness in energy prices. Even with weak energy prices we have NO concerns with Transocean–they have been around for more than 60 years in one form or another and they will be around another 60 years. These bonds are INVESTMENT GRADE. For those with an interest the CUSIP is 893830BD0.

Note that Transocean has a number of bond issues available with current yields of 2% to 8.6%–obviously the maturity dates vary.

We chose the issue we did because we want maturities a couple years out–at maturity there hopefully will be a wide selection of issue available with very tasty high yields (or course who knows 2.5 years out). Whether rates rise or fall for the couple of years we will have our returns locked in on this one.

When we add these to the model we will have to manually update prices from time to time as we will not be able to get a real time quote, but that is ok as we don’t expect alot of movement in these securities.

For Tom–the CUSIP is 893830(zero)BD0(zero).  Etrade has 200 or so bonds available.  I haven’t looked on Fidelity.

Also NOTE that these are investment grade, BUT on negative credit watch–meaning they may knock them down 1 notch (to high grade junk status).

 

 

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