A welcome reset of the interest rate from 3.14% to 6.45%
I don't imagine that (m)any on the forum bought these at a buck a pop, so it's a pretty good rate.
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A welcome reset of the interest rate from 3.14% to 6.45%
I don't imagine that (m)any on the forum bought these at a buck a pop, so it's a pretty good rate.
Yes, I'm happy with my new 11.5% rate.......
Hi, i'm new to bonds and more so perps and hoping for answers to a few questions and some specific to IFTHA. Sorry in advance i'm still learning about this:
1. Does the current yield based calculation factor that bond will be called at face value?
2. Generally in a rising interest rate environment current price should increase and vice versa in a falling rate environment? If so why would the price dropped today?
3. Total return is a factor of the average coupon for the holding period and the purchase and selling price?
4. At todays price of 0.74 would these still be considered good buying?
TIA
After you finish reading from page 1 of this thread, you can answer your questions except for Q2. Generally speaking, when the interest rate increases, the bond value goes down.
Thanks Newman. I have read the whole thread and i believe I have answers to most of the questions yet they are inferred and hence I was asking for explicit answers.
Your answer to Q2 leaves me wondering though. I see how that works for fixed coupon bonds: as interest rates go up bond investors sell their current bonds for higher yielding bonds and thus prices for the lower yielding bonds decreases. However, in the case of IFTHA the interest rate may increase making them more desirable thus increasing the price?
The rate reset occurred in November, before the 75 bsp increase though, it won’t move again till November 2023, so in the short term at least the rate looks less attractive.
A little info. on IFTHA and IFTHC in today's Chris Lee & Partners newsletter; (Market News 28th November-look on their web site).
That Chris Lee blog post was a lot of nonsense, arguing that default funds (which are retirement savings vehicles) should have stayed in cash and bond focused investment strategies because of short term market conditions is such a stupid position to take. Passive strategies have a tendency to beat active, you only need to look at Buffett's bet with the hedge funds.
Over the past year or so it's been interesting to see the New Zealand Financial Services Industry, and the investing public, respond to an environment of rising interest rates after more than a decade of static and/or falling interest rates.
There's even been the first faint stirrings of an understanding that there's more to Fixed Interest investing than simply the coupon rate.
Hopefully both groups have learned something and that they will be better placed to understand and cope with future changes.
Today my IFTHC bond payment came through and they are now paying 7.89%, so happy enough with that.
Can I ask, as i'm simply learning about perp bonds, is the fall in the price IFTHA a result of the market perceiving rate drops next time it resets?
And.....IFTHA recently went XI, so pricing adjusts accordingly.