How does the 6.750% coupon compare to current market yields for comparable 2029 senior notes?

Yield comparison

The 6.75 % coupon on AAR’s proposed 2029 senior notes is noticeably above the prevailing yield on comparable 2029‑dated investment‑grade corporate bonds. As of the week of Aug 11 2025, the secondary‑market yield for BBB‑rated, 5‑year‑to‑10‑year maturities is hovering in the 5.5 %–6.0 % range, while higher‑yield “Baa” or “BB” issues are trading around 6.2 %–6.5 %. In short, AAR’s 6.75 % rate is ≈ 100–150 bps higher than the bulk of the market for similarly‑sized, comparable‑credit‑quality notes that mature in 2029.

What this means for the trade

• Pricing premium: Because the coupon sits above market, the notes will likely be issued at a discount to par (i.e., a higher yield to the investor) or will need to be priced at a modest premium if the market accepts the rate. The discount provides an immediate yield‑enhancement for buyers, but it also raises AAR’s effective borrowing cost versus peers.
• Liquidity & price support: Higher‑coupon senior notes tend to attract more demand in a relatively tight credit market, giving the issue a solid secondary‑market floor. If yields on the broader 2029 curve drift lower (e.g., after a Fed easing cycle), the notes could price up toward par, delivering capital‑gain upside for early holders.
• Actionable view: For investors seeking a yield‑pick in the 2029 space, AAR’s notes represent a relatively attractive spread versus the benchmark curve. A short‑duration, high‑coupon position (buying at the discount) can be profitable if rates stay steady or decline. Conversely, if the market expects further rate hikes, the higher coupon may be justified and the notes could trade near par, limiting upside. Monitor the 2029 Treasury and comparable corporate yield curve, and size exposure accordingly—e.g., a modest long‑position at the discount with a stop if the note’s yield narrows to ≈ 6.5 % (the upper edge of the comparable range).