Investing for income: new opportunities from corporate bonds
● 安德鲁希钦斯 By Andrew Hitchings 王彼得（译）

　  In recent years, financial markets have become increasingly polarised between growth and security. Investors looking for a medium-to low-risk route to income in-vesting are increasingly turning to the corporate bond market as an alternative to equities and government bonds.

　Equities and government bonds are well suited to some investors. Younger in-vestors will benefit from equity capital growth because they are generally invest-ing for the longer term and not unduly concerned at the lack of immediate yield. Investors concerned with avoiding risk will be prepared to accept the relatively low yields now available on government bonds.

But many investors fall somewhere be-tween these two extremes. Corporate bonds offer an alternative to equities and government bonds, providing some of the benefits of each. With corporate bonds, an investor can opt for a lower risk exposure than with equities but a higher income yield than with government bonds.

　In Singapore, for example, a govern-ment bond maturing in 2004 with a cou-pon of 3.5% will currently yield about 3.4%.This is to say, for every S$100 of face value, the bond is currently selling for S$100.50, so that the annual coupon of S$3.50 is worth about 3.4% of the actual price.

　By comparison, the Ford Motor Cor-poration´s bond issued in Singapore dol-lars and therefore carrying no currency risk for a Singapore investor also matures in 2004. It carries a coupon of 4.5% but currently sells at slightly below its face value, at around S$99.50 per S$100 of nominalvalue.

This means that the yield for an investor is a little higher than the coupon, at around 4.6% of the actual price. The difference between two yields is commonly called the ´spread´. At the moment, as we see, the spread between Ford and Singapore gov-ernment bonds is around 1.2%. This

rep-resents the reward to the investor for ac-cepting the somewhat higher risk attached to Ford as opposed to the government of Singapore.