Articles Posted in Reverse Convertibles – Current Issues

Reverse Convertibles are having the Reverse Effect on Client Profitability – Boca Raton, Florida Arbitration and Litigation Attorney:

In 2010 banks sold in excess of $6 billion of bonds linked to the performance of stocks, promising substantial returns far exceeding CD and money market rates. The promised returns were generally even more than could be expected from standard bond funds or standard yields on bonds themselves. This was at a time when interest rates were at historic lows. Hence the attractiveness of the investments.

However, instead of receiving the promised returns, reverse convertibles, according to data compiled by Bloomberg on 1,481 of the securities sold last year that matured by November 30, 2010 lost, on average, 1 percent. The Standard & Poor’s 500 Index returned 8 percent during that period and corporate bonds gained 11.1 percent, including reinvested interest, Bank of America Merrill Lynch index data show.

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