Investing In Bonds/

[ExpatJ]

Does anyone here invest in bonds?

Do you prefer government or corporate or municipality?

What sort of returns do you get? Do you only invest in triple AAA rated?

Any recommendations of which bonds to invest in?

[Naam]

1. Does anyone here invest in bonds?

2. Do you prefer government or corporate or municipality?

3. What sort of returns do you get?

4. Do you only invest in triple AAA rated?

5. Any recommendations of which bonds to invest in?

1. i do, more or less exclusively since 35 years.

2. no preferences, it all depends on the market circumstances and currency movements.

3. presently the bonds i hold have a current yield between 3.90 and 11.50% and up to 15.90% yield to maturity. the average yield of my portfolio is 7.84% due to the fact that i am also holding substantial cash positions in various currencies which yield 0%. actual yield of the bond portfolio (ex cash) is close to 9%.

4. i hold bonds with debtor ratings of AAA down to B denominated in a variety of currencies. caveat: bond ratings might -due to their structure- differ from actual debtor ratings!

5. any recommendations to a bond-newbie would be an extremely reckless undertaking.

[CWMcMurray]

Naam, I understand from your above and previous posts that you are in multiple currencies / countries... just couriers how you picked those countries in the beginning.

Was it based upon you actually living at those markets at some point in your life or just by doing research and choosing countries based upon your research and then expanding your positions over time?

Did you enter into these markets on your own or did you initially start out using a Financial adviser?

[ExpatJ]

1. Does anyone here invest in bonds?

2. Do you prefer government or corporate or municipality?

3. What sort of returns do you get?

4. Do you only invest in triple AAA rated?

5. Any recommendations of which bonds to invest in?

1. i do, more or less exclusively since 35 years.

2. no preferences, it all depends on the market circumstances and currency movements.

3. presently the bonds i hold have a current yield between 3.90 and 11.50% and up to 15.90% yield to maturity. the average yield of my portfolio is 7.84% due to the fact that i am also holding substantial cash positions in various currencies which yield 0%. actual yield of the bond portfolio (ex cash) is close to 9%.

4. i hold bonds with debtor ratings of AAA down to B denominated in a variety of currencies. caveat: bond ratings might -due to their structure- differ from actual debtor ratings!

5. any recommendations to a bond-newbie would be an extremely reckless undertaking.

Thnaks, interesting. Instead of reckless recommendations- can i ask which triple AAA bonds you invest in and what their returns are?

[Naam]

Thnaks, interesting. Instead of reckless recommendations- can i ask which triple AAA bonds you invest in and what their returns are?

yield depends on the currency, the maturity and the bond structure. presently i hold only BRL, ZAR and NOK in bonds (debtors are Bank Nederlandse Gemeenten, European Investment Bank, Kreditanstalt fuer Wiederaufbau), return for BRL and ZAR 8-9% for NOK 4%.

[Naam]

Naam, I understand from your above and previous posts that you are in multiple currencies / countries... just couriers how you picked those countries in the beginning.

Was it based upon you actually living at those markets at some point in your life or just by doing research and choosing countries based upon your research and then expanding your positions over time?

Did you enter into these markets on your own or did you initially start out using a Financial adviser?

i started investing in different countries/currencies because i was a bloody newbie and had no bloody idea about investing, its possibilities and its risks. what i did was investing in currencies which yielded a multiple of the meager 2% i received on my Deutsche Mark savings account. for example UK AAA Gilts yielded end of the 70s ~13-14%, U.S. Treasuries a few years later 14-16% and the Latin America debt crisis which started in 1982 was truly a treasure for daring investors.

i remember buying Mexican government bonds in fall of 1982, denominated in British Pounds, nominal interest 16.50% priced at 80-82, current yield nearly 21%, yield to maturity something like 27%! cashed fat interest for a decade and sold at 154 with huge capital gains when George Soros attacked and brought the Pound down.

only after retiring in 1989 i had the time to really educate myself and doing my own research which was earlier not possible due to my work and life in the bush, the desert, the swamps and limited information from BBC World Service and Financial Times editions which were most of the time several weeks old.

the "Brady" debt restructuring

http://en.wikipedia.org/wiki/Brady_Bonds

starting a year later was another treasure chest for (gutsy) bond investors who, for more than a decade, could rake in yields which today one can only dream of. i remember discussions with a couple of friends where the going slogan was "let's not waste our time discussing any bond that has a yield below 16%!"

never used a financial adviser, au contraire! i advised a bunch of bankers because i could recite by heart the important passages of a dozen bond descriptions covering several dozens of bonds from different sovereign debtors.

alas... that is all water under the bridge. not only double digits returns but anything yielding more than 6% has considerable risk attached. that's why i keep urging my wife to take up an additional job as a maid and my dogs have to steal their food from dogs in the neighbourhood.

edited for addendum: i will be happy to answer any other specific questions.

Edited June 27, 2011 by Naam

[CWMcMurray]

very interesting... I am still fairly young and just starting to invest, so it is good to hear from some with a lot more experience.

[SolarOhm]

Investing in bonds is not for the novice. The best returns are usually from the capital gains to be had when the bank rate falls and also from the currency effect.

Investing in Thai bonds at the present time for the potential bank rate fall is positive but countering that could be the liklihood of the Baht falling as a consequence.

[Naam]

very interesting... I am still fairly young and just starting to invest, so it is good to hear from some with a lot more experience.

the positive aspect of bond investing is that you are able to plan ahead with tangible returns instead of hoping and praying that your stock will gain in price. but except for chances that occur only once or twice in a decade (e.g. 2008/2009) you have no chance to multiply your investment within a short period as it is possible with stocks.

[Naam]

Investing in bonds is not for the novice. The best returns are usually from the capital gains to be had when the bank rate falls and also from the currency effect.

i beg to differ and claim that investing in shares is not for the novice. besides, the average stock investor does not buy and expect capital gains. he will of course pocket any gains with a smile but his main target is to achieve a certain cash-flow for either covering his living expenses and/or for reinvestment.

but if somebody wants to gamble, the bond market provides nearly unlimited possibilities which could result in substantial gains or... losses.

[dairy queen]

@Naam: Where do you buy bonds i.e. through which institution? Do you have a private banker? [it seems to fully access the world of finance through a private banker you're not allowed to play until you have $2-3 million+].

Thanks for any hints as I want to have a go at buying some corporate/government paper...[i'd like to buy some blocks of bonds in the 10s of thousands of dollars; anything higher than this is out of my league for now].

[Naam]

@Naam:

1. Where do you buy bonds i.e. through which institution?

2. Do you have a private banker?

3. [it seems to fully access the world of finance through a private banker you're not allowed to play until you have $2-3 million+].

4. Thanks for any hints as I want to have a go at buying some corporate/government paper...[i'd like to buy some blocks of bonds in the 10s of thousands of dollars; anything higher than this is out of my league for now].

1. being with any bank -not some sort of building society - you should be able to buy the majority of bonds which are on the market.

2. i am banking with three multinational banks (which insist on very high entry levels) in two different jurisdictions (Singapore and Europe) and in each i can select one or more banker(s) of my choice to receive and carry out my instructions. by the way, i have heard the expression "private banker" for the first time in this forum.

3. an incorrect assumption even though some banks impose restrictions (you have to sign a bunch of indemnity and waiver documents) for certain types of high risk trading. but that does not apply to bonds no matter how high the risk.

in Europe (e.g. France, Italy, Germany, Switzerland) half a dozen so-called "direct banks" exist where you can trade (via your PC with mouse clicks) a huge variety of bonds with a starting capital of a "fistful" Dollars, EURos or Pounds and individual trades of a few hundred $, € or £. if you want i can post some links.

4. sorry, only an utmost arrogant ignorant would comply with your wish without evaluating your financial background, targets/expectations, risk profile and a bunch of other factors.

[dairy queen]

@Naam: I'm with HSBC in both Singapore and Thailand [Premier] and they'll only sell me their crappy structured products which have very high fees. [i've also got an online brokerage account in the US with one of the largest players]. To get your level of service it seems that I need a private banker. Most big institutions i.e. Credit Suisse, UBS, HSBC, Citibank et al won't even look at you until you have $2 million+. What I'm hoping that you can help me with is how to get your level of service when you're quite a bit less liquid that a couple of mil...

What are the 'entry levels' for your institutions in SG and Europe? Do you know of any where they're more flexible on your liquid net worth? [i'm not a pauper but it'll take me a bit longer to get to seven figures; especially if I don't get a decent return on what I've got...]

FYI I don't want your advice on what paper to buy; I just need to find out how to access this market, and have a spectrum of choices...For example, if I want to buy Singaporean, Thai or Hong Kong govt paper, how would I go about this as an individual without going through some fund? Or maybe individual bonds from multinational/regional companies...

in Europe (e.g. France, Italy, Germany, Switzerland) half a dozen so-called "direct banks" exist where you can trade (via your PC with mouse clicks) a huge variety of bonds with a starting capital of a "fistful" Dollars, EURos or Pounds and individual trades of a few hundred $, € or £. if you want i can post some links.

Please share some names! Any recommendations on which institutions are good i.e. service/platform?

Thanks in advance for your reply!

Edited June 29, 2011 by dairy queen

[ExpatJ]

@Naam: I'm with HSBC in both Singapore and Thailand [Premier] and they'll only sell me their crappy structured products which have very high fees. [i've also got an online brokerage account in the US with one of the largest players]. To get your level of service it seems that I need a private banker. Most big institutions i.e. Credit Suisse, UBS, HSBC, Citibank et al won't even look at you until you have $2 million+. What I'm hoping that you can help me with is how to get your level of service when you're quite a bit less liquid that a couple of mil...

What are the 'entry levels' for your institutions in SG and Europe? Do you know of any where they're more flexible on your liquid net worth? [i'm not a pauper but it'll take me a bit longer to get to seven figures; especially if I don't get a decent return on what I've got...]

FYI I don't want your advice on what paper to buy; I just need to find out how to access this market, and have a spectrum of choices...For example, if I want to buy Singaporean, Thai or Hong Kong govt paper, how would I go about this as an individual without going through some fund? Or maybe individual bonds from multinational/regional companies...

in Europe (e.g. France, Italy, Germany, Switzerland) half a dozen so-called "direct banks" exist where you can trade (via your PC with mouse clicks) a huge variety of bonds with a starting capital of a "fistful" Dollars, EURos or Pounds and individual trades of a few hundred $, € or £. if you want i can post some links.

Please share some names! Any recommendations on which institutions are good i.e. service/platform?

Thanks in advance for your reply!

I am with HSBC prem in singapore- just opened an offshore account there especially for bonds- i think the minimum purchase is @100-150,000 $???? They sent me a list of half a dozen bonds below- is this the same as your expereince with HSBC Singapore? :

Virgin Meida Sec 5.25% 01/15/2021

Price : USD 103.65

Yield to maturity: 4.779%

EDP FINANCE 6% 02/02/2018

Price: USD 98.10

Yield to maturity: 6.344%

MUMTALAKAT 06/30/2015 5%

Price: USD 99

Yield to maturity: 5.263%

PRIVATBANK 8% 02/06/2012

Price: USD 103.25

Yield to maturity: 4.061%

INEOS GROUP 8.5% 02/15/2016

Price: USD 103.65

Yield to maturity: 7.069%

[dairy queen]

@ ExpatJ: Are these bonds for specific companies, or an amalgamation of multiple bonds packaged together? . HSBC SG has not offered me individual government or corporate bonds. Only structured products with high fees...

Is EDP FINANCE in your list this organization: http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=20702446

[Naam]

in Europe (e.g. France, Italy, Germany, Switzerland) half a dozen so-called "direct banks" exist where you can trade (via your PC with mouse clicks) a huge variety of bonds with a starting capital of a "fistful" Dollars, EURos or Pounds and individual trades of a few hundred $, € or £. if you want i can post some links.

Please share some names! Any recommendations on which institutions are good i.e. service/platform?

no recommendations, just links:

http://www.six-swiss-exchange.com/index.html

http://www.swissquote.ch/sqweb/index.jsp

https://www.cortalconsors.fr/euroWebFr/- (french)

(german sites) should have english versions too!

https://www.cortalconsors.de/Home

http://www.comdirect.de/pbl/cms/cms/produkte/pages/cori4136_subhpprodukte.html

http://www.onvista.de/

[Naam]

I'm with HSBC in both Singapore and Thailand [Premier]

when Jesus heard that Dairy Queen and ExpatJ are banking with HSBC he covered his face and cried bitterly.

[Naam]

I am with HSBC prem in singapore- just opened an offshore account there especially for bonds-

1. i think the minimum purchase is @100-150,000 $????

2. They sent me a list of half a dozen bonds below

1.

2. :bah:

Edited June 29, 2011 by Naam

[Naam]

I just need to find out how to access this market, and have a spectrum of choices...For example, if I want to buy Singaporean, Thai or Hong Kong govt paper, how would I go about this as an individual without going through some fund? Or maybe individual bonds from multinational/regional companies...

no fund necessary, you can buy any individual bond or share. your problem is to find a bank with a low entry level. last year i was told Standard Chartered, Singapore has reasonable entry levels and my SG bankers told me they trade each and everything and their fees are reasonable.

[ExpatJ]

I think these hsbc bonds are individual cooporate bonds...

Naam..I'm not overly impressed with hsbc prem- their financial advisors suck. The main benefit of hsbc prem is it is easy to open up local accounts anywhere in the world without having to be resident in those countries. Eg. It took me less than 5 minutes to open my hsbc account in singapore!

[Naam]

1. What are the 'entry levels' for your institutions in SG and Europe?

2. Do you know of any where they're more flexible on your liquid net worth?

1. don't insist on an answer. i don't want to make you cry.

2. your best chances are either european direct banks or banks in Luxembourg. banking competition in Lux is very high and clients with a net worth of €150-200k won't have a problem to find a bank which accepts them and carries out any trade, be it via a european exchange or OTC.

[Naam]

@ ExpatJ: Are these bonds for specific companies, or an amalgamation of multiple bonds packaged together? . HSBC SG has not offered me individual government or corporate bonds. Only structured products with high fees...

Is EDP FINANCE in your list this organization: http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=20702446

these are all individual bonds. interesting is the fact that INEOS was recommended. a company who's bonds were down at bankruptcy level only two years ago.

[dairy queen]

Thanks for the replies guys. I'm going to have to do some [more] thinking.

@ Naam: Not to worry; I'm not going to cry any time soon! Things could be way worse and this issue is merely an inconvenience that is hopefully only temporary. [As a FYI Standard Charters for their Private Banking service in SG is a minimum of $1 million liquid]. Somehow I need to work out how to achieve a reasonable coupon through fixed income on Asian currencies like SGD, THB, HKD. Any ideas/suggestions?

[Naam]

,snipt to save space> Somehow I need to work out how to achieve a reasonable coupon through fixed income on Asian currencies like SGD, THB, HKD. Any ideas/suggestions?

now it's me who has tears in the eyes thinking of the coupons in these currencies. SGD hardly anything on the market and what you find is 1.5-2% for 4-5 years maturity. THB virtually zero available offshore. HKD is useless, you might as well go for USD because HKD is pegged to USD since the Roman Empire was founded

but there are some interesting corporate bonds denominated in USD available. held them last year but kicked them out because of profit taking, e.g.

-TRUE 10.375% 01-08-2014 ISIN USY31939AC85

-Bakrie 11.500% 05-07-2015 ISIN US922646AT10

they must be both trading at around 110-112 having a yield to maturity of ~7%

do you have any access to bond listings and prices?

[ExpatJ]

Naam- can you recommend a website that lists bonds?

[Naam]

what about looking at BRL and ZAR? triple A rated debtors and yields of 8-9%? or something safe in NOK, triple A rated and yield 4%? or perhaps a "gutsy" quasi-sovereign in USD yielding 16%?

[Lancelot]

1. being with any bank -not some sort of building society - you should be able to buy the majority of bonds which are on the market.

2. i am banking with three multinational banks (which insist on very high entry levels) in two different jurisdictions (Singapore and Europe) and in each i can select one or more banker(s) of my choice to receive and carry out my instructions. by the way, i have heard the expression "private banker" for the first time in this forum.

Buying foreign bonds with most US brokerage accounts is not as easy

I have accounts at Fidelity and Schwab, so I went shopping for Brazilian and Aussie bonds. I found that you cannot find listings for such bonds on the brokerages' Web sites. However, if you're a customer, you can speak to a trader who specializes in foreign debt. But there's this catch: Schwab requires you to buy bonds worth a minimum of 100,000 units of the relevant currency. So, if you're buying a bond from the euro zone, you have to buy 100,000 euros' worth (roughly $140,000). If you're buying Brazilian debt, you need to buy at least 100,000 reais' worth ($55,000).

The Fidelity rep told me I'd have to order $100,000 worth of bonds, at a minimum, "and then we'll try to go get 'em; there's no guarantee." His explanation: Demand is low, and the spread between bid and asked price would be too wide on an order smaller than that. I wasn't joking about being a millionaire.

http://www.kiplinger.com/columns/balance/archive/2009/balance0811.html

Any way, I really like Naam's strategy of holding the bond to maturity- or selling them when the principal increases and harvesting a nice capital gain

[Naam]

Buying foreign bonds with most US brokerage accounts is not as easy

i concur Lancelot. but sinners who use brokers to buy bonds must be punished

[Naam]

Any way, I really like Naam's strategy of holding the bond to maturity- or selling them when the principal increases and harvesting a nice capital gain

in my case the percentage of holding bonds to maturity was for many years virtually zero. simple reason: i exclusively invested in extremely long maturities to achieve purchase prices much below par and high nominal coupons (most bang for the buck).

considerable bond price fluctuations enabling profitable trading for the private investor started in the early to mid 90s and opportunities to make exceptionally high profits (sometimes 10-20% in a few trading days or even within hours) were provided by the "tequila crisis" 1994, the "asian flu" 1997, the "vodka crisis" 1998, the "tango crisis" 2001/2002, the "Lula ante portas samba crisis" 2005 and last not least "Lehman" 2008/2009.

nowadays i'm waiting [im]patiently for the "tsatsiki-gyros-Akropolis crisis" to surface (if any)...