Citigroup Bonds Look Like A Big Mouse Trap

Oh, that's a tasty bond they've got sitting there, but behind that tasty bait waits death for unwary investors.

Every time I look at Citigroup's (NYSE: C) bonds--a pretty attractive issue--I can't help but think of the concept of the mouse trap.

Indeed, Citigroup's got a pretty tasty hunk of bread in peanut butter (better bait than cheese, you know!) on that crossbar; 120.79 nets you a non-callable bond, maturing in 2039, with a coupon rate of 8.125 and a yield of 6.726 and a Fitch Rating of A.

But behind that tasty bait is a pile of rusty ironmongery and a vague whiff of mouse death. See, in Tuesday's trading, Citigroup was part of a group of financial stocks that took a seriously bad hit over a worldwide nastiness. The troubles in North and South Korea, coupled with the ongoing calamity that is Europe and the SUKPIG nations, did a number on Citigroup's stock prices.

In fact, Europe announced that they'd be charging banks to operate in Europe, so that they could build a fund to bail them out should catastrophes like the one they're having now happen. And that means a substantial penalty to Citigroup earnings so that they can pay another government-imposed operations fee.

Sure, Citigroup doesn't just operate in Europe and South Korea, but that's a fair chunk of their business. And considering how deeply at risk that segment is, it doesn't bode well for Citigroup, and thus, doesn't bode well for their bonds, either.

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