RE:Bond holders only get that its the safest way to invest...select1011 wrote: in the company given that SP isn't performing. It reflects a flight away from buying the stock.
I doubt it's flight. Provided the company remains solvent, the bonds can be held to maturity with no risk beyond inflation and the payout never falters. If the stock is volatile, the bonds may also offer potential for capital gains -- all with no risk, given the same solvency proviso. And if solvency fails, the bondholders are paid before the stockholders.
I think it's Rule who says, "The lowest-grade bond is always worth more than the highest-grade equity for a company." I can't agree in theory, since the risk-free treasury rate puts a firm limit on the gain you can make on a bond, but in practice there's much to be said for his claim. He backs it up by holding Teck bonds rather than Teck shares.
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