BBB Means Buy, Buy, Buy

Corporate bonds rated just above junk level offer 7% yields with little risk of default or insolvency.

It's early for cautious income investors to rush into high-yield bonds, though junk's completing one of its best months in a long time. But the nearest category to junk -- the lowest tier of investment-grade corporate bonds, meaning those rated BBB by Standard & Poor's or Baa by Moody's -- is a comfortable alternative.

Moody's reports that Baa-rated corporate bonds finished the week ending April 25 yielding an average of 7.0%, with industrials at 7.15% and utilities at 6.85%. That's peanuts compared with the 11% you can get from my favorite oil royalty trust, BP Prudhoe Bay (symbol BPT).

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Jeffrey R. Kosnett
Senior Editor, Kiplinger's Personal Finance
Kosnett is the editor of Kiplinger's Investing for Income and writes the "Cash in Hand" column for Kiplinger's Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.