Bonds

[Basil]

Big fall in ten year Govt stock this week, about 60 bps. Closed about 3.7% down from 4.3% a couple of weeks ago.  Are we headed lower still ?
Are good quality medium term corporate bonds good buying at over 5% or is this just a head fake and we have a lot more wood to chop with inflation so the capital losses in the bond market could continue ?  Are you're better off staying short with your money ? e.g. Heartland just announced a term deposit of 4.0% for 1 year yesterday.  Thoughts ?

[BlackPeter]

Who knows.

Governments will keep throwing money at the plenty problems the world currently has (war in Europe, pendemic, global warming) ... this is clearly inflationary.

Public and private debts will keep rising faster than ever ... and the only way to pay unaffordable debts is by defaulting or by inflating them away. Both is inflationary.

Whoever looses the current war is likely not to be able to pay back their debts. Better make sure not to deal with banks who give money to loosers.

On the other hand:

Oil-price unlikely to double another time in a couple of months, isn't it? Some other greedy autocrats will always try to make hay while the sun shines and they will sell their basically unlimited supply of oil before the world moves too fast (for them) to green energies.

Transport and shipping is as expensive as never before (not just due to the oil price but due to Covid inflicted issues). High prices are always the most effective enemy of high prices - i.e. transport cost more likely to come down over the coming months rather than further increase.

Hard to say which arguments will prevail in the short and medium term. I have a leg in both camps ... but start slowly to increase my bond portfolio. Balanced is good ;

[Raven]

I'm staying short.
10% bonds and 90% short term bank deposits.

[Mr Cashflow]

Expect the unexpected.
https://www.cnbc.com/2022/07/01/us-bonds-10-year-treasury-yield-in-focus-on-recession-fears.html

[Basil]

My core thesis remains we are either in recession already or headed into one and its looking increasingly likely we have seen the peak of 10 year bonds for the foreseeable future.

Last time I looked yesterday our 10 year Govt stock rate was down to 3.50% a full 80 points down from it recent peak.

I think very high quality ~ 5 year corporate bonds, the likes of power companies and high quality corporates like SUM are good buying in the 5 - 5.5% range and slightly lesser quality corporate bonds like OCA are good buying in the 5.50 - 5.80% range.

Higher yields are available on the likes of Synlait bonds at a touch over 8% but I am not interested in the risk involved there.  I'd rather take an equity risk on a decent company like TRA or GNE to achieve an 8%+ return with equity upside.

[kiwi2007]

Westpac Bank – Subordinated Notes
 
Westpac New Zealand Limited (WBC) has announced that it is considering an offer of subordinated notes.

The notes are expected to have a 10-year maturity date but may be repaid after 5 years if certain conditions are met.

At this stage the interest rate has not been set but based on comparable market information it is likely to offer an interest rate of around 5.75% fixed for the first 5 years. After 5 years the interest rate will be reset to a new interest rate (unless the Notes are repaid on this date).

The notes have a strong credit rating of A-

[winner (n)]

Todays news from interest.co.nz

The big news today is the raising on the one year Kiwi Bond rate by +25 bps to 3.50%. Their six month rate is unchanged at 3.00%. These effectively set the risk-free rate boundary for term deposits. Why would you take less from a lower-rated bank than the high-rated NZ Govt?.

[kiwi2007]

Westpac Bank – Subordinated Notes

Forecast to be near or on 6% and with WBC an -A .
Average return on the stock market is what? 6-8% .
At my ripe old age I'm happy to fill my boots with this offer.

[mcdongle]

Arnt these tier 2 bonds?

[kiwi2007]

Transpower – Senior Bonds
 
Government owned Transpower has announced that it has launched a 5-year senior bond.

At this stage the interest rate has not been set but it is likely to offer an interest rate of around 4.60% fixed for 5 years. After 5 years the bonds will be repaid.

The bonds have a strong credit rating of AA.

Chris Lee...

[Basil]

Arnt these tier 2 bonds?

Yes but they still have a credit rating of A- and a yield north of 6% so I put my hand up for a few.

[Basil]

6.19% was the yield.   Happy with that.

[mcdongle]

Yes i held my hand out for a few as well...

[Glenorchy]

I put my hand up for a few too. Were you guys scaled? As I only got 60% of what I asked for. Seems it was popular.

[mcdongle]

No, I got what i wanted