The market for unsecured bonds has been closed for weeks, leaving banks with no option but to sell covered bonds at usurious interest rates that will challenge their profitability.
As part of the latest eurozone bailout deal for Greece, private lenders to the country have been given the option of extending their bonds into new debt with longer maturities and lower interest rates.
The established option loophole in Germany is convertible bonds.
The first option is for the ECB to purchase bonds in the secondary market.
Emerging market (EM) bonds generally represent another attractive option for investors seeking real income and potential diversification in 2013.
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Sweeney noted that stocks historically have generated larger returns than bonds, making them a better option to offset the effects of long-term inflation.
Another option for novice investors is a fund that combines stocks and bonds in something resembling the 60%-to-40% proportion of classic balanced funds.
Of course, defaulting countries will want at some stage to return to the capital markets, and the option that they will at some point start paying the coupons on their bonds is worth something.
The monetary authority, says Mr Miller, should sell convertible bonds which, if denominated in Hong Kong dollars, carry an option for the holder to convert into American dollars at the set rate.
Staying in cash is not a viable long-term option, and investors would be out of their mind to put money in most bonds at current prices.
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As politicians and their allies look for ways to finance tax rate cuts, a surprising option is getting a great deal of attention among conservatives: The tax exemption for municipal bonds.
Another option suggested by a poster on Bogleheads.org was to start investing in the EE Bonds at age 60 and then start redeeming them at age 80, immediately after they had doubled in value.
It would unlock chains of inter-company debt, as well as weaning banks off the easy option of keeping big chunks of their balance sheet in (supposedly) risk-free government bonds and encouraging them to take more credit risk.
But given how the recent downturn has slashed valuations, and given that stocks of strong companies tend to fare far better than bonds during inflationary climates, I think these big dividend-payers are a more attractive option right now for those with long-term time horizons.
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When employees are offered retirement plans that include no option for investing in their own company's stock, they typically allocate half of their money to bonds and half to stocks.
Essentially, an investor can just put money in an age-based investment option within a 529 college savings plan account and the money manager will automatically change the allocation of stocks and bonds to a mix that is less heavy in stocks and more heavy in bonds and cash as college draws near for the account beneficiary.
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