Trust Certificates: Links in One Post Duplicate Post
I have created a duplicate of this post. I amend it frequently by adding new material and links. Any changes in the older post, published in 9/2009, now takes several minutes to make which is why I created a duplicate with some deletions at the end to shorten the post. The post from 9/2009 is still at its original location.
Another frequent topic of discussion in this blog is a unique way to own a bond, and to purchase them on a stock exchange rather than in the bond market. I call them Trust Certificates, sometimes abbreviated to just TCs. A Trust Certificate represents an undivided interest in the property of a trust that contains a bond from a single issuer, that bond is referred to as the underlying security of the Trust. The trustee collects the interest payments from the issuer and then disburses those funds to the owners of the Trust Certificates. Most Trust Certificates have a par value of $25 which makes them more affordable for an individual investor who may not want to buy a bond in the minimum unit of $1,000.
I give a general discussion of Trust Certificates in this post. Trust Certificate JZJ AT & T BOND It would also be helpful for anyone unfamiliar with this form of ownership to read a prospectus just to become acquainted with this type of security, before even trying to make a selection.
I currently own a large number of these securities. During the 4th quarter of 2008, they became seriously mispriced compared to the prices of the underlying security. On top of that, the underlying securities were frequently being seriously mispriced in the bond market in my opinion, particularly in October 2008, so it was like a discount to a discount in my view. Back then it was not unusual to pick up 3, 4 or even 5% more by buying the bond in Trust Certificate form than by buying the bond directly in the bond market, and corporate bonds were then trading at historically high premiums to comparable U.S. Treasuries. I have discussed some of the reasons behind this dysfunctional pricing which is less of an issue now. The prices for the individual bonds contained as the underlying securities in the Trust Certificates can be found at the FINRA web site, and I have started to collect links to the pertinent bonds in the following Gateway Post. LINKS TO FINRA INFORMATION ON UNDERLYING BONDS IN TRUST CERTIFICATES
AGAIN, I RECOMMEND BECOMING A MEMBER OF THIS FREE SITE.
In these posts I discuss many that I currently own and some of my trading activity in them:
AFC CAPITAL (guaranteed by Hanover Insurance) Bought 50 KRH in IRA at 18.62 Bought 150 TC PKM at 17.8 & 17.5 Bought 50 of the TC KRH at $19 Bought 50 PKM at 24.84 Sold 50 KRH at 24.6 Bought: KRH at 24.85 Sold 100 of 150 PKM at 25.93 KRH PROSPECTUS: www.sec.gov PKM PROSPECTUS: www.sec.gov FINRA INFORMATION UNDERLYING BOND: FINRA
ALLSTATE: GJT is a synthetic floater with no guarantee Bought GJT at 8.30 Sold GJR, Trimmed GJT 13 SYNTHETIC FLOATERS Sold 50 GJT at 17.5-Some Details about Managing My Two IRA Accounts Modification of Trading Rule in Unstable Vix Pattern: Dynamic Asset Allocation Bought 50 GJT at 18.15-Roth IRATC Prospectus for GJT: www.sec.gov Underlying Bond Prospectus: www.sec.gov FINRA INFO UNDERLYING BOND: FINRA
AON Sold Dkk Ex Interest Today TRUST CERTIFICATE AON BOND KTN TRUST CERTIFICATE AON BOND KTN ORDER FILLED AT 13.10 Managing Risk in an IRA: KTN and KVW Links To Prospectuses for the AON TCs in One Place... Bought 50 DKK in Roth/ TC KVW Pricing / KTN add at less than $14 Added 50 of the TC DKK at 23.34 Sold 100 KVW at 24.75 Sold 50 of 150 DKK at $24.87 Sold 50 of 150 KTN at 28.17 FINRA INFO ON UNDERLYING BOND: FINRA DKK Prospectus: www.sec.gov KTN Prospectus: www.sec.gov KVW Prospectus: 424B5 KVF Prospectus: 424B5 Underlying Bond Prospectus: ww.sec.gov DKK and KVW Called by Owner of Call Warrant
AT & T: (AUGUST 2010-JZE AND GJF CALLED & JZJ PARTIALLY CALLED BY OWNER OF THEIR RESPECTIVE CALL WARRANTs) JZE: MORE DETAIL Trust Certificate JZJ AT & T BOND Some Nibbles Got Filled: JZE at 12.5 , PJS, INZ and FAX JZE AND JZJ: UNDERLYING AT & T BOND DATA at FINRA Jobs /DD/ TCs with AT & T BONDS Added to Long Bond Positions: Bought JZJ at 17.5 / Bought GYC at 15.5: Synthetic Floating Rate Bond Bought GJF Sold 50 GJF at 24.25 Added 50 JZJ at 24.75 Call Warrant Exercised on JZE and JZJ Bought TC GYC at $21 Sold GYC at 22.3 in regular IRA Added 50 GYC at $21.60 in Roth IRA FINRA Info Underlying Bond In JZJ FINRA JZJ Prospectus: www.sec.gov JZJ UNDERLYING BOND PROSPECTUS: www.sec.gov GYC Prospectus: www.sec.gov FINRA INFORMATION UNDERLYING BOND GYC FINRA UNDERLYING BOND PROSPECTUS GYC Prospectus Supplememt
BANK OF AMERICA: Buy of 50 MJH at $7.51 Sold 50 MJH at 23.6 MJH PROSPECTUS: www.sec.gov Burlington Northern Santa Fe: (DELISTED after Berkshire acquisition) Bought 100 GJX Jobs Report/ Echo Bubbles/Louis Yamada/Sold UTIW & TimberWest/ /Bought 100 of the TC GJX at 25.17 Sold 100 of the TC GJX at 25.9
CNA FINANCIAL Buy of 50 JZV at 9.93 (still own) TRUST CERTIFICATE CNA BOND JZV SOLD 100 JZV WITH GTC LIMIT ORDER AT 16.25 (bought at 12.78) Bought back 1/2 of JZV Position at 12.50 SOLD 1/2 JZV at $14.07 Bought 50 TC JZV at 22.6 Added 50 JZV at 24.23 Bought 70 JZV @ 24.14-Regular IRA Added 50 JZV @24.14 Sold 120 of the TC JZV at $25.50 SOLD 50 JZV at 25.62 Added 50 JZV at $23.04 FINRA INFO ON UNDERLYING BOND: FINRA JZV Prospectus: www.sec.gov
DOMINION RESOURCES: Bought GJP/ GJP is a synthetic floater with a guarantee Bought KR/Wells Fargo: A Ray of Sunshine/More on Recent Floater Purchases/ Bought GYB/DD/Will Hold Synthetic Floaters In Retirement Account (NOTED SELL AND INTENT TO TRANSITION TO RETIREMENT ACCOUNT FROM TAXABLE ACCOUNT) Bought 100 GJP at $18.97/ /Sold 100 GJP at 22.42 Bought 50 GJP at 20.55 Sold: 50 GJP at 23.31 Bought Back Synthetic Floater GJP at 22.25-ROTH IRA Finra Information on Underlying Bond: FINRA TC PROSPECTUS: www.sec.gov UNDERLYING BOND PROSPECTUS: FORM 424B5
EMBARQ: (ACQUIRED by CTL) CTL Acquires Embarq/ BOUGHT 100 of the TC FJA at 15.35 Bought another 50 FJA at 14.2 Sold 50 of 100 FJA at 24.75 Sold 50 of the TC FJA at $24.84 TC PROSPECTUS: www.sec.gov UNDERLYING BOND PROSPECTUS: Form 424(b)(4) FINRA INFO UNDERLYING BOND: FINRA - Investor Information - Market Data - Bonds - Bond Detail
FIRST AMERICAN: Bought PJS at 7.2-October 2008 FAF-PJS/LB Would Rather Listen To Alex the Parrot rather than RB/ More discussion on Bonds: Purchases and Sell Decisions/ Bought 50 PJS at 17.95 August 2009 Bought 50 PJS at $17.8 in Roth Sold 50 of 300 PJS Sold ALL PJS at 24.75 & 24.65 Bought 50 PJS at 23.73 Sold: 50 AFE at 24.59 & PJS at 25.45 Bought 50 of the TC PJS at 24.84 Added: PJS at 24.72 Bought 50 PJS @ 24.6 Sold 100 PJS @ 25.2 FINRA INFORMATION UNDERLYING BOND: FINRA PJS PROSPECTUS: www.sec.gov Prospectus for Underlying BOND: www.sec.gov
GOLDMAN SACHS: Added another 100 GYB in Regular IRA at $11 Sold 100 GYB at 18.09 Bought 50 GYB Sold 50 GYB at $15/ GYB is a synthetic floater with a guarantee Analysis of Prior Question about Goldman Sach's Floaters GOLDMAN SACHS FLOATERS Goldman Sachs 6.345% Junior Debenture Maturing on 2/15/2034 Item # 2: Bought 50 of the TC JBK at $16 Item # 4: JBK Bought 100 JBK at $16.15 New Information about JBK Bought 100 GJS AT $13 (GJS is a synthetic floater with no guarantee) Sold 100 GJS in the Roth IRA at $15.6 Bought: 50 GJS at 14.6 Sold 50 GJS @ 16.20 Bought 100 GJS at 10.5 (april 2009) SOLD GJS at 13.06 Bought 50 PYT at 11.2 Bought 50 PYT in Roth at 13.34 PYT is a synthetic floater with a guarantee Bought 70 PYT at $15.75 Sold 70 PYT at 18.66 and Bought 70 GYB at 18.49 in Regular IRA Bought 50 PJI at 20.85 Sold 50 of 100 PJI at 21.35/ Added 50 PJI at 20.17 Sold 50 PJI at 23.52 Bought 50 PYB at 22.83 Bought 50 JZS at 22.95 Pared Trades in Roth: Sold 100 PYT at 19.25 & Bought 100 GYB at 18.98 Sold 100 JBK at 21.59 Sold 50 JBK @ 21.59 Bought 100 DKW at 22.86 (DKW CALLED by owner of Call Warrant) Bought 50 DKW @ 23.07 Sold 50 JZS @ 24.15 Sold 50 GJS @ 16.20 & 100 GYB @ 19.9 Sold 100 GYB @ 19.4 Alert on TC DKW-Exercise of Call Warrant/SOLD 50 OF 150 DKW @ 25.20 Sold 100 DKW @ 25.25 Bought 50 GYB @19.07 Bought 100 PYB @ 23.81 Bought 50 PYB @ 23.69 Bought 50 JZS at 23.37 Bought 50 PJI at 23.11 Bought 50 PYT at 18.06 in the Roth IRA Bought 50 GYB at 18.63 in the Roth IRA Sold 50 JZS at 23.1 in Roth IRA Sold 100 of 200 of the TC PYB Bought 50 GJS at 16.9 in Roth IRA FINRA INFO ON 2033 SENIOR BOND: FINRA JZS PYB PJI DKP DKW HJG GJS UNDERLYING BOND PROSPECTUS FOR GS 2033 SENIOR: www.sec.gov FINRA INFO ON 2034 GS TP FINRA GYA GYB JBK PYC PYY PYK PYT HJJ HJL HJN UNDERLYING BOND PROSPECTUS 2034 GS TP: www.sec.gov PJI PROSPECTUS: www.sec.gov (2033 SENIOR BOND) GYB PROSPECTUS: www.sec.gov (SYNTHETIC FLOATER) JBK PROSPECTUS: www.sec.gov (2034 TP) PYT Prospectus: www.sec.gov (SYNTHETIC FLOATER) JZS Prospectus: www.sec.gov (2033 SENIOR BOND) PYB PROSPECTUS: www.sec.gov (2033 SENIOR BOND) DKW PROSPECTUS www.sec.gov (2033 SENIOR BOND)
GOODYEAR TIRE: Goodyear Tire TC XKK (12/2008 post) Aegon Perpetual Preferred & XKK (jan 2009 post) Buy of XKK at $3.8 in IRA LINKS TO LONG TERM BOND BUYS IN PRIOR POSTS (dec 2008 post) Goodyear Tire XKK (nov 2009 post) Added 50 XKK at 8.98 Sold 300 of the 550 of the TC XKK Sold: 100 of the 200 XKK at 9.96 Bought 200 of the TC XKK at 10.02 FINRA INFO ON UNDERLYING BOND: FINRA XKK PROSPECTUS: www.sec.gov Underlying Bond Prospectus: www.sec.gov
J P MORGAN Buys of a JPM TC PYV PYV is a synthetic floater with a guarantee PYV a Hold? BUY 50 GJN at $12 GJN is a synthetic floater with a guarantee SYNTHETIC FLOATERS BOUGHT 100 GJK IN ROTH at $19.83 SYNTHETIC FLOATERS Sold PYV at $23.3/Sold 100 GJK at $24.6/ GJK is a synthetic floater with a guarantee Sold 50 GJN at 22.08 GJN Prospectus: www.sec.gov PYV Prospectus: www.sec.gov GJK Prospectus: www.sec.gov
IPB: A TC CONTAINING 15 CORPORATE BONDS AND TREASURY STRIPS Bought 100 of the TC IPB at $16.99 Calculations On How to Recreate Trust Certificate IPB More On IPB Part 2 More on IPB Sold 50 IPB at 20.28 Bought 50 of the TC IPB at 21.3 Bought: 50 of the TC IPB at 23.11 in IRA IPB Prospectus: www.sec.gov
LIBERTY MEDIA SOLD 1/2 OF PIS POSITION/ Sold Remaining shares in the TC PIS/ Sold PKK at 24.1 Bought 50 PIS at 25 Bought 50 PIS at 24.88 in Roth IRA SOLD 100 PIS at 25.95 FINRA Information on Underlying Bond in PIS PYL PYA: FINRA FINRA Information on Underlying Bond in PKK: FINRA PKK Prospectus: www.sec.gov PIS: Prospectus: www.sec.gov
MACY'S (originally issued by May Department stores, acquired by Macy's) Morning Trades: Sold DKQ, TRUST CERTIFICATE MACY'S BOND DKQ Bought 50 of the TC DKQ at $15.95/ BOUGHT 50 DKQ AT 19.03 Sold 50 of 100 DKQ at 21 Sold50 DKQ @ 23 Bought 50 DKQ at 22.06 Sold 50 DKQ at 23.32 FINRA INFORMATION ON UNDERLYING BOND: FINRA DKQ Prospectus: www.sec.gov Underlying Bond Prospectus: www.sec.gov
PRUDENTIAL Sold GJR, Trimmed GJT & JZH/ TRUST CERTIFICATE JZH: PRUDENTIAL SENIOR BOND-Bought at 9.75 Financials: 3 Strikes and Your Out/CISCO/Regulations and Conservatism Trimmed JZH Pared JZH by Selling 50 at $20.2 BOUGHT 50 JZH AT 21 (POST FROM MAY 2010) Sold 50 JZH at 24.45 (bought total cost 14.81 in 9/2008) Sold 100 of the TC JZH at 24.11 FINRA INFO UNDERLYING BOND: FINRA JZH Prospectus: www.sec.gov Underlying Bond Prospectus: Prospectus Supplement
SEARS ACCEPTANCE Bought 100 SSRAP at $17.25 (TC-Underlying Bond from Sears Acceptance) FINRA INFORMATION ON UNDERLYING BOND: FINRA SSRAP PROSPECTUS: www.sec.gov UNDERLYING BOND PROSPECTUS: www.sec.gov
Sprint: (DKI Called by Owner of the Call Warrant) /Bought 50 of the TC DHM at 21.35 Bought 50 GJD at 17.49 Bought 50 GJD at 17.8-Roth IRA Added 50 GJD at 17.95 Sold 50 of the 150 GJD at 18.59 Sold 100 GJD at 20.2 Sold 50 SLGPRC at $24.76 Sold DHM at 24.4 Bought 50 DKI at 24.95 Bought 50 DHM @ 24.51 FINRA Information Underlying Bond for GJD and DHM: FINRA (2028 Sprint Capital) FINRA Information Underlying Bond for DKI: FINRA (2032 Sprint Capital) Underlying Bond Prospectus for Sprint Capital 2028: www.sec.gov Underlying Bond Prospectus for Sprint Capital 2032: www.sec.gov GJD Prospectus: www.sec.gov DHM Prospectus: Prospectus Supplement DKI Prospectus: www.sec.gov
Unum: Bought 50 PJR at 16.72/ /Junk Bonds/ Buys of JWF KSA DIS and NYX/ SOLD KSA BUY OF 50 KSA IN IRA AT 16.31/ ADDED TO PJR at 20.7 Sold 100 of KCC Bought PJR Sold 50 PJR at 25.79 PJR Prospectus: www.sec.gov FINRA Link Underlying Bond in PJR: FINRA KSA Prospectus: www.sec.gov FINRA Info Underlying Bond in KSA: FINRA
VERIZON (XFL CALLED 3/24/2010 by Call Warrant owner) TRUST CERTIFICATES JZJ AND PJL-Bought 50 PJL at $19.5 PJL TRUST CERTIFICATE Bought PJL at $24.2 Trust Certificates PJL and XFL: Verizon Bond /Bought 50 PJL at 25.37 Bought 50 PJL at 25.48 in the Roth Sold 50 of PJL in Roth at $26.5 Alert on Verizon TC XFL Call Warrants and Trust CertificateS: XFL CALLED Bought 50 of the TC PJL @ 25.3 in IRA Sold 150 of the TC PJL at 26.5 FINRA INFORMATION ON UNDERLYING BOND: FINRA PJL Prospectus www.sec.gov
It is important to understand how the call warrants contained in the prospectuses will impact the price of the TC and its redemption, when the underlying bond in the TC is selling at a premium to its par value. More on the Call Warrant in TCs Call Warrants and Trust CertificatesCall Warrant Exercised on JZE and JZJThe Trust Certificates can only be understood by reading the prospectuses and doing your homework. In these posts, I explained how I decide to buy one, and the various factors that enter into the decision making process. Some Certificates contain senior bonds, others have junior bonds, some are floaters, some of the underlying bonds are rated junk and others are investment grade with some higher quality names like AT & T and Verizon. Each one has to be considered on its own merits. I am an opportunistic buyer of these securities, so most of them are currently priced at levels that have little or no interest to me. Many are currently classified as long term holds as part of my bond allocation. THIS IS ALSO A FRUITFUL AREA FOR A TRADING STRATEGY CALLED FUNCTIONAL EQUIVALENCE, UNTIL I STARTED TALKING ABOUT THAT TRADE. Functional Equivalence in Bond Trading/Hedge Funds & Independent Adminstration These are links to what I view as important information about these investments, risk management in bonds, inflation and credit risks and bonds in general: Managing Interest Rate Risk Inflation or Deflation: Bond Alternatives/ What is the More Rational Prediction for the Future-Inflation or Deflation Trust Certificates: Issues with Long Term Corporate Bonds Item # 2 Interest Rate Risks- Bonds Managing Risk for Each Security in the Asset allocation Rising Rates and Your Investments Risks of Investing in Bonds Understanding Interest-Rate Risk Bond Investment Strategies