Would You Buy A Boeing Bond?

Author: Steve Anderson on May 24, 2010

We're all terribly concerned about the rate of return on most bonds, because frankly, rates of return are pretty lousy no matter where you go.  However, Boeing's (NYSE: BA) is giving you one big reason to like them--a four percent yield.  It's a non-callable semi-annual bond that's currently rated A by Fitch Ratings, and four percent is good by most any measure, especially these days.

But does that mean you should be buying Boeing?  Four percent is a great return, and A is a pretty solid Fitch rating.  And that would be enough, under normal circumstances, to suggest buying Boeing bond. 

Yet doubts linger here, like the smell of a bad airline meal.  The biggest one, of course, is the industry itself.  It's at least approaching common knowledge that the airline industry as we know it cannot be profitable if oil goes over a hundred and twenty five dollars a barrel.  Sure, given that oil right now is sitting at a pretty comfortable seventy bucks a barrel, this concern doesn't look so pronounced.  But considering oil hit record highs not so long ago, and oil isn't exactly a renewable resource, it could easily go back there again.  Like as in, before a bond comes due.

Plus, economic weakness is still out there, driving down the numbers of people who buy tickets.  Business travel is still off its norms and so is recreational travel.  The staycation ain't going away, people.

And this casts Boeing bonds, decent yield aside, in a truly unpleasant light

Read More Articles →