Bonds

[causecelebre]

Does anyone hold IFTHA Infratil Perpetuals? Re-rated to 6.45% with a discount to face value currently around 73.5c for a yield of 8.7%. I'm new to this instrument and wonder if there are any thoughts on whether this is fair value?

[kiwi2007]

Chris Lee on bonds:

Expects a continued flow of retail bond issues and that in 2023 bond issues in New Zealand will be plentiful. Warns that each issuer should be checked carefully.

[kiwi2007]

https://www.ft.com/content/b087cf89-9b1e-4728-aacb-05bc2b821a70

.......    We might never see the likes of it again, but we think 2023 might be the year where owning bonds becomes cool again. Pimco's Dan Ivascyn certainly thinks so. Here's an internal Q&A he did today.

    ....Value has returned to the fixed income markets. Just thinking about nominal yields, we'll start here in the United States, across the yield curve now, you could lock in a very high quality bond yield today. You could look for very high quality spread product, and very, very easily put together a portfolio up in the 6, 6 and a half, percent type yield range, without taking a lot of exposure to economically sensitivity assets.

    Much better than cash, but also pretty good versus equities. So, those that have been in cash, looking for incremental return, fixed income's looking quite attractive. So we do think it should be a call to action, these higher yield levels.

    On the flip side, if you're concerned about inflation, you can look at various inflation-protected securities, and generate an inflation-adjusted return, or real yield, of greater than one and a half percent, even in some cases close to 2 percent.

    In fact, we haven't been back to those real yield levels since, really, the years leading up to the global financial crisis.

Obviously, bond house Pimco is congenitally inclined to think that bonds look attractive......

[kiwi2007]

A pretty positive note on bonds from Harbour management as part of their 'Top 10 risks and opportunities for 2023'.

https://www.interest.co.nz/bonds/118909/harbour-asset-managements-hamish-pepper-chris-di-leva-look-top-10-risks-and

"..We think that with central banks well into their tightening process, supply side inflation moderating, and demand softening, a backdrop is created for stronger bond returns compared to recent years. Importantly, bonds are now at yield levels where they have plenty of room to rally if a non-inflationary macroeconomic shock were to occur..."

[kiwi2007]

From Chris Lee:

China Construction Bank (NZ) Limited has announced that it is making an offer of 3-year floating rate notes.

The interest rate is variable and will be adjusted each three months. The rate for the first three months will be around 5.80 – 5.90% and will increase if rates go higher and decrease if rates fall.

This investment suits investors who are concerned about inflation and want to protect themselves if rates rise further.

These notes have a strong credit rating of A.

CCB will not be paying the transactions costs for this offer. Accordingly, clients will be charged brokerage.

[Herbert240]

Nothing on Chris Lee site???

[Raven]

The CCB offer has already been allocated and contract notes issued by Chris Lee.

[Herbert240]

ok, must have been reserved for his so called "sophisticated investor" clients

[kiwi2007]

ok, must have been reserved for his so called "sophisticated investor" clients

I'd imagine that if you're going to buy the bonds through them they'd open you an account.

anyway:

ANZ Bank (ANZ) has announced that it plans to issue a new senior bond maturing in 5 years' time.

The interest rate has not been announced, but based on comparable market rates, we are expecting an interest rate around 5.10 – 5.30%.

ANZ will not be paying the transactions costs for this offer. Accordingly, clients will be charged brokerage.


and:

Wellington International Airport

WIAL has announced that it is considering issuing a 5.5-year senior bond. More details will be released next week, however we are expecting the bonds to have an interest rate of around 5.25%.
 
These notes have a strong credit rating of AA-.

[Raven]

ok, must have been reserved for his so called "sophisticated investor" clients

Its easy, just contact them and open an account.

[kiwi2007]

Details of the Wellington Airport Offer:

Wellington International Airport (WIA) has announced that it plans to issue a new senior bond maturing in 5.5 years' time.

A minimum interest rate has been set at 5.60% and the bonds have a minimum investment size of 10,000 bonds.

These bonds have been issued with an investment grade credit rating of BBB.

WIA will not be paying the transactions costs for this offer. Accordingly, clients will be charged brokerage.

We have uploaded the term sheet and presentation to our website below:

https://www.chrislee.co.nz/uploads//currentinvestments/WIA090.pdf

[kiwi2007]

Opinion  The Long View
The asset class du jour: corporate bonds
Higher yields have boosted the popularity of bets on the debt of companies
https://www.ft.com/content/008e02cb-c4a5-4e0d-b2fc-86b533fcab35

[kiwi2007]

Taking Stock 16 February 2023

THE ANZ's recent bond offer was hugely oversubscribed, resulting in 50% scaling for investors.

This suggests either that it was mis-priced (the 5.22% rate too generous), or it suggests there is a huge amount of investor money looking for long, strong bonds, urgency created by a fear that interest rates have peaked.

I have no such fear.

Until inflation shrinks to whatever the new, acceptable level might be, short-term rates will rise.

Long bonds already enjoy a ''negative yield curve'', meaning long-term rates are lower than short-term rates.

It is hard to see how that yield curve can become even steeper. A much steeper negative yield curve would signal a grim year or two ahead.

I suspect the ANZ has been smart in scooping up $500 million. The 5.22% rate might soon look cheap.

This week Wellington International Airport is issuing a 5 ½ year bond with a minimum rate of 5.6%.

I expect many more issues from the private sector, especially from corporates which prefer to step away from the strictest covenants demanded by banks when they grant long-term loans. I suspect the Ryman rights issue of discounted shares has its origin in the high cost of debt.

These interest rate increases cannot be good for those home owners who must renegotiate their mortgage rates in coming weeks.

It would be a brave optimist that assumed that NZ had already discovered how great the fall might be in household discretionary spending.

Credit card borrowing is still increasing.

How much of that increase in expensive debt is simply a reaction to the greater cost of mortgage debt servicing, and to the reality of inflation of essential goods?

(If you want to attract a laughing response, then pretend that inflation for households is only 6%!)

[kiwi2007]

Summerset (SUM) has announced that it plans to issue a new 6-year senior bond and expects to release full details of the bond offer next week.

The initial interest rate has not been announced, but based on comparable market rates, we are expecting an interest rate of approximately 5.80 - 6.00%.

At this stage it is unknown whether SUM will be paying the transactions costs for this offer.

The bonds will be listed on the NZX.

[kiwi2007]

Summerset (SUM) has now announced that its new 6-year Senior, Secured Bond will have a minimum interest rate of 6.45%

SUM have also confirmed that it will be paying the transactions costs for this offer. Accordingly, clients will not be charged brokerage.