i remember i read an article you can make a lot of money specialised on buying "Debt Instruments" very cheaply (which nobody wants) of distressed companies. That is you are a specialist and knows the distresses are most probably "temporary" only.
(21-04-2013, 11:46 AM)Temperament Wrote: [ -> ]i remember i read an article you can make a lot of money specialised on buying "Debt Instruments" very cheaply (which nobody wants) of distressed companies. That is you are a specialist and knows the distresses are most probably "temporary" only.
Have some experience here. Bonds yielding about 8-9% are probably below investment grade and closer to bb- rating. Tenure probably 7 yrs and up. Also probably denominated in usd or some non Asian currency. He probably bought his bonds a while back when int rates were higher.
Currently if you buy invest grade bonds, they are yielding 3-5% for usd for 7-10 yrs. actually with <1m, one should buy a bond fund and not individual bonds which will cost 250k each. The default risk not quite worth it. And you should tier the duration of your bond fund too.
Personally I think one should buy individual bonds only if one is buying about min 20 bonds or about 5m inclusive leverage. That way u can make a 5-10'yr bond ladder and diversify your bonds. And always remember never to buy too much of 1 name! Ideally is about >10m worth of bonds. Then u can really build the ladder and diversify with 30-40 names.
Currently I am owning no sovereigns,equal junk bonds and invest grade ones. Half sgd, rest usd ,aud, cnh, Gbp. Currency risk mitigated via borrowing in that currency. Duration low at 3%. Meaning if int rate go up 1%, my bond value will drop 3%. This is a sign of earlier maturities of the bonds. Sold off most longer dated and perps already. Only holding perps that have reset or very high fixed rates.
(21-04-2013, 09:49 AM)Drizzt Wrote: [ -> ]wow i like the idea of bonds that gives 8-9% interest. I wonder if it is higher risk corporate bonds.
perhaps they are like Aviva 8% USD structured bonds, ING 7.3% USD bonds.
I suspect the $ made is mainly not from the coupons, but from buying it at a deep discount below par of distressed debt, and selling it for a capital gain subsequently when it proves it does not default.
(21-04-2013, 01:42 PM)KopiKat Wrote: [ -> ] (21-04-2013, 11:31 AM)CY09 Wrote: [ -> ]China Fishery, an SGX listed firm, has bonds yielding at 9.75% issued in 2012.
http://em.cbonds.com/emissions/issue/33445
Swiber had been issuing 7.125% ones and Preps @ 9.75%.
Most recent issues - 7.125% on Apr-13 due 2017 ; 9.75% Preps on Sep-12
Don't buy these bonds like swiber and china fishery unless you view this like an equity level type of investment. Bonds are meant to be safe and stabilize your overall portfolio. 250k can be easily lose 20%. Even Olam a much bigger company, the bond holders are sitting on paper loss of about 15% for perp holders even today.
Over a >5yr horizon, this kind of company hard to say if they will be safe. As for capital gain upside, very difficult as int rate are already so low.. Those easy gains were from 2009-2012.
agree with greypiggi.
u shd delve into the reasons behind the bond issue.
(21-04-2013, 05:04 PM)greypiggi Wrote: [ -> ]Don't buy these bonds like swiber and china fishery unless you view this like an equity level type of investment. Bonds are meant to be safe and stabilize your overall portfolio. 250k can be easily lose 20%. Even Olam a much bigger company, the bond holders are sitting on paper loss of about 15% for perp holders even today.
Over a >5yr horizon, this kind of company hard to say if they will be safe. As for capital gain upside, very difficult as int rate are already so low.. Those easy gains were from 2009-2012.
Agree with greypiggi to be cautious on these.
There's always a reason why companies are offering 7%, 9% coupon rate when the 10yr Singapore bond is barely 1.6%.
Dont leverage on these bonds if one cannot afford to lose.
Some RMs/bankers would be delighted to allow you to leverage on purchased and encourage to double down on dubious bonds .
Anyone know where can I get info about how bonds are rated? Not all bonds are rated. I am looking at CMA 3.8 retail bonds. But I am not sure how to effectively gauge the debt level. CMA is a manager of trusts, and the trusts are geared at different level an the parent is capital land. Will a debt problem at any of these subsidiary or parent company create a domino effect?? Any advice??
(21-04-2013, 07:30 PM)Greenrookie Wrote: [ -> ]Anyone know where can I get info about how bonds are rated? Not all bonds are rated. I am looking at CMA 3.8 retail bonds. But I am not sure how to effectively gauge the debt level. CMA is a manager of trusts, and the trusts are geared at different level an the parent is capital land. Will a debt problem at any of these subsidiary or parent company create a domino effect?? Any advice??
CMA is a listed company in SGX - it is a REIT Manager + Sponsor and a regional mall developer. You can review its financial statements to determine the level of risk.
http://capitamallsasia.listedcompany.com/ [Investor Relation Website]
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