Ishrc � Discussion Threads

[kiwi2007] 02/9/2009 14:04

You'll have looked at the non cumulative preference thread I guess?


Some quite solid yields around 8% tax paid available if you're in for the longer term. Interesting gamble on the part nationalised bank high yielding prefs too...

[borderbill] 02/9/2009 12:36

I think you may be right - but what else to do. I posted on 12 August saying I thought the outperformance vs gilts of similar duration was probably over for a while. I still see it beating cash though on a 6 month view. This has been a very rewarding hold - I started buying last October (and continued for some months !) when I was evacuating from bank deposits and have now taken 3 dividends and have a healthy capital gain. My only worry is that gilt yields look quite tight now after the latest run (which I missed - too greedy) and this has a long duration. Its a pity there is not a shorter duration low charging collective corp bond fund that I know of - if anyone does please let me know. On unrelated matters I am now selling my short dated 2013 index linked gilts which I bought when everyone thought we were going to have negative inflation. Any ideas on a home for the cash - I am at a loss to find anything interesting. Bill

[ptolemy] 02/9/2009 10:29

Have investment grade corporate bonds peaked for the time being? They really have moved up strongly recently and many are now priced at 2007 levels.

[kiwi2007] 01/9/2009 13:00

Hi Bill - You're almost certainly correct - I must admit that I thought that the accumulated was part of the NAV but looking at the 5 day chart it seems to point to it not being? Lots of sellers around though!

[borderbill] 01/9/2009 12:53

Presumably it fell back to NAV when it went xd, ie the price should gradually rise above NAV every 3 months until the premium peaks at the level of the next dividend ? Bill

[kiwi2007] 01/9/2009 12:42

Looks to be trading at very close to NAV at the moment - perhaps the big players are moving on ? Also overseas holders will be finding cable's fall expensive and the extra yield not worth the candle.

[davebowler] 27/8/2009 16:24

ipe is still a cheap way to get exposure to Euro corporate bonds and a swift realisation at NAV is likely via City Merchants ( a sister trust run by Pauls Read and Causer) as it trades 3% below asset value versus a premium with City.

[borderbill] 17/8/2009 12:51

Going xd soon

Ex Date: 26th August 2009
Record Date: 28th August 2009
Payment Date: 23rd Sept 2009

iShares £ Corporate Bond GBP 1.7821

[borderbill] 12/8/2009 09:15

When I said duration I meant average term of course.

[borderbill] 12/8/2009 09:14

The duration of SLXX is about 17 years and it yields 6.25%, corresponding gilts yield 4.25%. I suspect we may have a pause in the relative outperformance of SLXX over gilts for a while but still expect it to beat cash for some time yet. Bill

[kiwi2007] 11/8/2009 12:31

US C-Bond Market but...

Bond ETFs Draw a Surge of Funds

Corporate Offerings Rally; Taking TIPS

By JOHN SPENCE

Investors burned by the stock-market meltdown are piling into bond exchange-traded funds in an effort to tone down risk and generate stable income.

In particular, ETFs tracking inflation-protected bonds and corporate debt have seen cash fly in the door this year, which reflects the trend of more investors using bond ETFs to manage the fixed-income side of their portfolios, industry insiders say.

"The ETF market started in stocks," said Matt Tucker, head of U.S. fixed-income investment strategy at iShares, the family of ETFs that BlackRock is acquiring from Barclays along with its Barclays Global Investors unit.
'Low-Cost Exposure'

"Now ETFs are giving investors precise, liquid and low-cost exposure to the bond market," Mr. Tucker said. "This opens up the door for investors to do asset-allocation and sector-rotation strategies with fixed-income ETFs."

At the end of June, there were 740 ETFs listed in the U.S. with total assets of nearly $600 billion, according to State Street Global Advisors. Bond ETFs accounted for only 63 funds and $78 billion, but the fixed-income portion of the business is expected to expand in coming years with bond giant Allianz's Pacific Investment Management Co. and others entering the fray.

Investors have been pumping money into corporate-bond ETFs this year amid a solid rally in this beaten-down corner of the debt market.

Through the end of June, the two best-selling ETFs in 2009 in the iShares lineup tracked bonds. One of these was iShares iBoxx $ Investment Grade Corporate Bond Fund (trading symbol: LQD), with inflows, or net buying, of nearly $5 billion. The fund had total assets of $12.7 billion as of Aug. 6 and was the fourth-largest iShares ETF.
Seeking Havens

When the credit crunch gripped the market in late 2008, the yield spread between corporate bonds and safer Treasurys widened drastically as investors ran for cover. However, some savvy investors bet that spreads got too wide and that markets were incorrectly forecasting a second coming of the Great Depression.

"The Federal Reserve has lowered rates and become much more aggressive in battling the financial crisis," Mr. Tucker said. "Spreads have tightened, and we've seen some incredible rallies in corporate bonds since March."

The bond strategist said the move has been driven by signs of stabilization in the U.S. economy, which should result in better profits for companies and allow them to service their debt. However, there could be declining demand for corporate bonds given how well they have already performed this year.

ETFs tracking high-yield corporate bonds, or "junk," such as (HYG) and SPDR Barclays Capital High Yield Bond ETF (JNK) have performed even better. Through Aug. 6, the funds had risen 16.8% and 22.6% for the year-to-date period, respectively, according to investment researcher Morningstar Inc..............more....

[kiwi2007] 06/8/2009 11:11

Fixed interest market seems to like the BoE announcement.

[kiwi2007] 31/7/2009 12:09

I've always had a lot of time for Scottish based fund managers :o)

Edinburgh Money Managers Forecast Further Corporate Bond Gains

By Rodney Jefferson

July 31 (Bloomberg) -- Fixed-income money managers at Edinburgh's two biggest fund companies are forecasting further gains in corporate debt.

European high-grade notes have returned 9.6 percent including reinvested interest this year, after losing 3.3 percent in all of 2008, Merrill Lynch & Co. data show.

"There is still a lot of value out there, so we're seeing retail fund flows and pension fund flows into credit," said Rod Davidson, head of fixed income at Scottish Widows Investment Partnership, which manages 46 billion pounds ($76 billion) of bonds and cash. "It doesn't make it a one-way bet, but it certainly makes it a more attractive investment opportunity."

Investor demand for corporate notes has driven yields relative to government debt to the narrowest since Sept. 15, the day of the collapse of Lehman Brothers Holdings Inc. Bond sales remain at record levels, with European companies raising more than 790 billion euros ($1.1 trillion) in 2009, according to data compiled by Bloomberg, an almost 60 percent increase from the same period a year ago.

"You are going to continue to see a lot of these corporates issuing into the market," said Andrew Sutherland, who is responsible for 20 billion pounds as head of credit at Standard Life Investments. "In a perverse way you have the credit crunch causing massive amounts of issuance and partly providing the means for the market to devour that."

Net Inflows ......more....

[borderbill] 28/7/2009 13:42

Kiwi, thanks for that, it is very much my line of thinking. Ive decided to hold onto my SLXX but to switch out of some of my cash proxies (short gilts and short ILG's) into TR27 or TR32. Not expecting a big run but can see it back above par and giving a total return of 10% over 12 months. Bill.

[kiwi2007] 28/7/2009 12:27

TR27 certainly starting to look interesting.

Listened to Roger Bootle, on Deloitte's site recently and his view is that base will stay low until at least end 2011 and perhaps for five years!!

Anyway another voice, albeit on US corporates and in the WSJ, agrees that this is the place to be.
David Rosenberg: Corporate Bonds Better Bet Than Stocks for Recovery.


Bearish market watcher David Rosenberg, chief economist and strategist at Gluskin Sheff, isn't expecting a sharp rebound in the economy - the so-called V-shaped bounce back.

With that, and the recent run-up in share prices, in mind, Rosenberg thinks that corporate bonds are a better bet for investors than than stocks.

Unlike the stock market, which has de facto priced in a 40-50% earnings surge in 2010, there is no such hurdle or high-hope in the corporate bond market, which is still largely priced for a deep recession - a GDP contraction of 1-2% going forward and the unemployment rate heading towards 11-12%. Insofar as the economy does not relapse to such an extent, there is a significant cushion embedded in the pricing of the corporate bond market this time, even after the impressive rally - from Armageddon levels, mind you - earlier this year.

Rosenberg points to today's Journal story on the possibilities for bonds. In it Kent Wosepka, chief investment officer at Standish Mellon Asset Management, had this to say. "If you believe in a V-shaped recovery, then you buy stocks. If you believe we're going to bump along, then you have to go with credit."

[borderbill] 28/7/2009 11:28

I hold SLXX and gilts through a ltd company so can't comment in detail on the personal tax issues but as far as I know (and have been told by my accountant) the income has always been taxable. The difference is that unlike gilts and qualifying corporate bonds any capital gains from an etf (even if it holds gilts and qcb's) are also chargeable. My motto is don't worry about paying the tax, it shows you are making money. My average price is about 102 here and am heading for a third distribution. That counts as a good result when my deposits are getting 1%. I might switch a bit into long gilts soon though given I remember how miserable I felt when this was below 100 !, my target is 95 for the TR27. Bill

[kiwi2007] 28/7/2009 11:08

It does look like dividends are now taxable - pity, takes the edge of it slightly for UK taxpayers.

[mac15] 27/7/2009 18:31

It appears from .pdf below that dividends from SLXX will now need to be declared to revenue( unless in an ISA ) and for basic and higher rate tax to be paid.
Has anyone got further info?. Motley Fool has discussions but no definitive answer.
Looks like as SLXX deals mainly in bonds and not equities, that tax will have to be paid by holder.

[kiwi2007] 27/7/2009 13:51

and

Corporate Bonds in Favor

By ANNELENA LOBB and ROB COPELAND

While the stock-market rally is hogging the headlines, corporate bonds are staging their own remarkable surge.

The average junk-rated company is now no longer "distressed," meaning yields have fallen to less than 10 percentage points above the benchmark Treasury bond. Yields on higher-quality companies also are dramatically lower as investors feel less leery about corporate debt. As yields fall, bond prices rise.

Stocks and corporate bonds are benefiting from the same generally upbeat mood this earnings season on signs in quarterly reports the economy is winding toward the end of the recession.

Still, it is hard to blame investors for not plowing all their cash into stocks.

Some investors are choosing to hedge their bets, preferring corporate bonds.....more...

[kiwi2007] 27/7/2009 13:50

BoE says corporate credit conditions better in Q2
07.27.09,

[kiwi2007] 27/7/2009 13:03

"We think that interest rates will stay at their record low until the end of 2011" - so says Deloitte today - no wonder decent quality corporate credit with a healthy yield continues upwards and onwards.
Some of the less well rated junk ITs have also started to really kick in in the last few days. i.e.

[borderbill] 29/6/2009 14:53

Gosh this is fun, puzzled as to premium over NAV when it has just passed a divi though. This seems to happen periodically.

[kiwi2007] 22/6/2009 12:36

AA-rated Monson: Why you should avoid corporate bonds

By Sara Smith | 09:58:37 | 22 June 2009

Sarasin & Partners's thematic investment guru Guy Monson has urged investors not to buy gilts until yields rise above 5% and warned investors off corporate bonds....

[davebowler] 15/6/2009 13:51

IPE is 75% in Euro High Yield Bonds, run by Paul Reed/Causer and 12% below asset value.

[kiwi2007] 15/6/2009 13:31

BorderBill

Though I still hold lots of SLXX I've been 'investing' more in CHY and NCYF for long term income recently - both hold lower quality bonds but do pay out rather more in dividends and they have been outperforming SLXX over the last few weeks - of course they are ITs and not ETFs so not perhaps the most suitable place for 'cash' type holdings.