Sharsies and Corporate Bonds

[Beagle]

One thing that's got under my skin a bit is the brokerage rate on corporate bonds traded on the NZDX. Now that some decent bonds are back to trading on a yield to maturity of ~ 5% and the outlook in market for shares is pretty difficult I reckon bonds are starting to look like a fairly attractive asset class for some of one's investment portfolio, (after starting the year with the worst losses in capital value in decades).

Bonds are traded on the NZX just like shares I struggle to accept why the brokerage rate on these should be different to the 0.2% on shares through Direct Broking / Jarden Direct, pricing for bonds is here https://www.jardendirect.co.nz/pricing
To add insult to injury they charge you the $5.50 trade fee on top of their 0.5% brokerage for under $50K of bonds which is 2 1/2 times their brokerage on shares yet these are all executed electronically on the NZX ?

I looked on Sharsies website but couldn't see any pricing for corporate bonds, anyone know if bonds are priced differently to their 0.1% brokerage on shares on that platform ?

[Snow Leopard]

https://www.sharesies.nz/learn/how-to-invest-online-from-term-deposits-to-bonds-to-buying-and-selling-shares

Read it and be educated, maybe learn to spell Sharesies correctly at the same time.

[Gerald]

You can't buy individual bonds on Sharesies, you can buy bond etfs like NZB (nz) or TLT (US). Fees still not great I think 0.5% buy/sell up to 3k and 0.1% thereafter + whatever the etf charges (like 0.5%-1% annually?)

Considering the liquidity in NZ bonds letting loose Sharesies in there could make a mess lol :)

[Beagle]

You can't buy individual bonds on Sharesies, you can buy bond etfs like NZB (nz) or TLT (US). Fees still not great I think 0.5% buy/sell up to 3k and 0.1% thereafter + whatever the etf charges (like 0.5%-1% annually?)

Considering the liquidity in NZ bonds letting loose Sharesies in there could make a mess lol :)

Thank you. Oh yes...I see your point. Also a lot of bonds have a minimum holding of 5,000. No point ordering 1 or 2 bonds in XYZ company is there !
Might just have a wee chat with one of the brokers at Jarden I know and see if I can get a special brokerage deal on parcel's of bonds, $100K plus.

[maclir]

Thank you. Oh yes...I see your point. Also a lot of bonds have a minimum holding of 5,000. No point ordering 1 or 2 bonds in XYZ company is there !
Might just have a wee chat with one of the brokers at Jarden I know and see if I can get a special brokerage deal on parcel's of bonds, $100K plus.

What do you make of the Mercury offer?

[Gerald]

What do you make of the Mercury offer?


Nearly 6% on the bonds vs 3% on the equity :scared: I thought bonds were meant to be less risky?

Quite a few companies similar if you have a look. Doesn't make the NZX50 look too cheap.

[GTM 3442]

I'm not interested in the new Mercury issue.

The term's too long with a maturity date of 2052

The rate reset dates are too far apart at 5 years

Mercury can redeem them virtually at will, wiping out any potential upside if interest rates come back down

The credit rating is BB+, below "investment grade", and would lower the average credit rating of my portfolio unacceptably.

Better off with something else.

Pushing out the MCY030 Green Bonds at 1.56% over 7 years In 2020 seems to have gone to their heads.

[Beagle]

What do you make of the Mercury offer?

Apologies, I have only just seen your post. I realise its too late now, unless you buy on market when they list but for what its worth I put my hand up for some and am pleased with the 5.73% yield for the first five years. It goes to a reset then and holders can opt out at that point if they are not happy with the new terms and MCY are obliged to buy them back. I think the credit rating may be somehow a function of the term of the bond but in any event I am happy with their gearing ratio and its a power company so people will be demanding power no matter what happens in the economy.

If it makes you feel any better I only got a fraction (36%) of the bonds applied for. I note that was after Mercury elected to take up their right to borrow the extra $50m in oversubscriptions, total ($250m) so there was obviously huge demand for that issue.

I got a message from sharesies late this week telling me they don't do bonds directly.

For what its worth I think some of the bond rates are starting to look attractive here relative to the average dividend yield on the NZX.

[Bjauck]

Is anybody going for the Channel Infrastructure/ NZ Refining issue? They are unrated. I was thinking about it what with the cloud hanging over the share market.

[Grimy]

Is anybody going for the Channel Infrastructure/ NZ Refining issue? They are unrated. I was thinking about it what with the cloud hanging over the share market.

I've applied for some. The term of the bonds is covered by forward contracts so I see the risk as being acceptable and it diversifies my bond holdings. Will be interesting to see what level of scaling (if any) there will be.

[Bjauck]

I've applied for some. The term of the bonds is covered by forward contracts so I see the risk as being acceptable and it diversifies my bond holdings. Will be interesting to see what level of scaling (if any) there will be.
Likewise for the diversification. The withdrawal from refining brings a bit less volatility.

[Beagle]

I think this is a good time to be leaning into more bonds at these sort of levels as I think the Bear is well and truly in charge of the market for at least the rest of 2022 and maybe some of 2023 as well. Bonds have had the worst start to the year in many decades so I think high quality medium term corporate bonds are good buying here at over 5%. I prefer rated bonds with companies that have an extremely robust and well proven business model that will survive any financial conditions.

[Beagle]

I've applied for some. The term of the bonds is covered by forward contracts so I see the risk as being acceptable and it diversifies my bond holdings. Will be interesting to see what level of scaling (if any) there will be.

Rate set at the minimum of 5.80%. Interestingly they only took the $100m not the optional extra $25m of oversubscriptions so I'm speculating this wasn't heavily oversubscribed or scaled much ?

[GTM 3442]

The Christchurch Airport 5.18% 19/5/2028 issue was scaled (for me at least) by 50%!

[Grimy]

CHI020. Not scaled. I got what I applied for.