Ford Bonds Gain On Moody's--High Return, Slightly Less Risk

Ford Bonds Gain On Moody's--High Return, Slightly Less Risk

If you're dismayed with your current rate of return, there's a whole new reason to consider Ford bonds--they're slightly safer now.

It wasn't so long ago that Ford (NYSE: F) was announcing a return to profitability, despite the fact that the general economy looked (and still looks) like a death march in slow motion. And indeed, Ford was the only one of the Big Three American car companies that didn't take any government bailout money back in the disastrous last half of 2008.

Here's where things get interesting--literally AND figuratively!--because if you believe Ford's own hype about its profitability chances, you've got an opportunity to do some serious damage with their own bonds.

Right now, the coupon rate on a Ford Motor Credit Co LLC bond (the financing arm of Ford) is 7.875 percent, with a current yield of 7.690. It pays out semi-annually, and here's the part that means anything to you: Moody's, the rating service, just upgraded Ford's bond rating from B2 to B1.

The reasons for the upgrade are likely clear to you already once you put them all together--a better overall economy (by how much is debatable), a better picture of automotive sales markets, and the fact that Ford isn't currently a subsidiary of the federal government unlike its competitors.

Now, what that means, is that for at least the immediate term, buying a Ford bond is not only yielding vastly better interest than you'll find most anywhere else, but as a somewhat more secure prospect than it was. Of course, B1 is still nothing great--we're not even talking AN A, let alone the maximum ranking--but it's still a significant step up. And if you're interested in high return with a side of risk, then Ford bonds are looking just a little bit brighter.


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