sharetrader
Page 1 of 2 12 LastLast
Results 1 to 10 of 11
  1. #1
    Senior Member
    Join Date
    May 2007
    Location
    Auckland, , New Zealand.
    Posts
    882

    Default Air NZ Bond AIR030

    Air New Zealand has announced that it plans to issue a 5.5-year senior bond. Maturing 27th April 2028
    The interest rate has not yet been fixed, but will be a minimum of 6.00%, with interest paid April and October.
    Any takers?
    Last edited by Grimy; 17-10-2022 at 01:35 PM.

  2. #2
    Member
    Join Date
    Dec 2011
    Location
    Christchurch
    Posts
    334

    Default

    Im going to give it a miss

  3. #3
    Senior Member
    Join Date
    May 2007
    Location
    Auckland, , New Zealand.
    Posts
    882

    Default

    Me too. I briefly considered it, but I think there will be better pickings on the NZX before too long. The term of the bond and the government being an owner may suit some people at present. If the return had been a little higher I would have been keener.

  4. #4
    Legend peat's Avatar
    Join Date
    Aug 2004
    Location
    Whanganui, New Zealand.
    Posts
    6,503

    Default

    its tricky because one senses an opportunity due to the safety net of the govt as the largest shareholder but I personally forego opportunities like this where the investment doesnt stand on its own merits but has some guarantee express or implied. I'll use the example of South Canterbury Finance if you recall the situation where there debt was quite safe AND paying a higher risky rate .

    Anyway I think this bond will act more like equity i.e be risky and go down in value when times get tough. There is less need to accept risk in a bond portfolio now adays
    For clarity, nothing I say is advice....

  5. #5
    Senior Member
    Join Date
    Nov 2018
    Location
    Christchurch
    Posts
    1,064

    Default

    Quote Originally Posted by peat View Post
    its tricky because one senses an opportunity due to the safety net of the govt as the largest shareholder but I personally forego opportunities like this where the investment doesnt stand on its own merits but has some guarantee express or implied. I'll use the example of South Canterbury Finance if you recall the situation where there debt was quite safe AND paying a higher risky rate .

    Anyway I think this bond will act more like equity i.e be risky and go down in value when times get tough. There is less need to accept risk in a bond portfolio now adays
    Agree. When inflation is like 8 or 10% annually, why would you waste time looking at fix term investments like bonds?

    In Finance news, the classic 60/40 allocation for stocks / bonds is recording it's worse year ever. All those Kiwi Savers licking their wounds.

  6. #6
    Speedy Az winner69's Avatar
    Join Date
    Jun 2001
    Location
    , , .
    Posts
    39,047

    Default

    Calling Sierra Bravo Quebec

    I agree with your comments
    ”When investors are euphoric, they are incapable of recognising euphoria itself “

  7. #7
    percy
    Join Date
    Oct 2009
    Location
    christchurch
    Posts
    17,549

    Default

    Take care with bonds.The following is from Chris Lee's newsletter.
    WITH an inflationary environment so suddenly following a deflationary one, a question commonly posed asks whether the low-yielding bonds of yesteryear should be sold in favour of more recent, higher yielding issues.

    While every situation is different, some truisms are worth recalling.

    There is no free lunch. When bonds are sold, they are sold at a price mutually agreed by both parties. A buyer of low-yielding bonds may demand a steep discount, whereas a seller of high-yielding bonds may demand a premium.

    In 2020, the Auckland Council issued bonds maturing in 2050, offering an interest rate of 2.95% per annum. After initially seeking $300 million, the Council eventually accepted bids totalling $500 million. At a time when investors were fearful of interest rates turning negative, the issue closed oversubscribed. Some of the more unscrupulous ''advisers'' elected to profit further from this demand, buying the bond for themselves and on-selling it to clients at an even lower yield, arguing that such actions were ''market forces''.

    The economic cycle changed, and negative rates never eventuated. 2.95%, even from our largest council, is now well below the market average. A seller of these bonds today would reap barely 60 cents in the dollar. The seller could then elect to invest into a more recent bond, earning an interest rate of, say, 6%.

  8. #8
    Speedy Az winner69's Avatar
    Join Date
    Jun 2001
    Location
    , , .
    Posts
    39,047

    Default

    The end of the story above -

    At the risk of oversimplifying the equation, a $10,000 investment earning 2.95% has become a $6,000 investment earning 6.00%. The $4,000 difference has, effectively, been transferred to the buyer of the lower yielding bonds. Although other factors will form part of an investment decision, that loss of principal is permanent.
    Add brokerage - both ways - into the deal, and suddenly, the lunch is looking quite expensive indeed.
    ”When investors are euphoric, they are incapable of recognising euphoria itself “

  9. #9
    percy
    Join Date
    Oct 2009
    Location
    christchurch
    Posts
    17,549

    Default

    Quote Originally Posted by winner69 View Post
    The end of the story above -

    At the risk of oversimplifying the equation, a $10,000 investment earning 2.95% has become a $6,000 investment earning 6.00%. The $4,000 difference has, effectively, been transferred to the buyer of the lower yielding bonds. Although other factors will form part of an investment decision, that loss of principal is permanent.
    Add brokerage - both ways - into the deal, and suddenly, the lunch is looking quite expensive indeed.
    Thanks W69.

  10. #10
    Member
    Join Date
    Jul 2020
    Location
    NEW ZEALAND
    Posts
    458

    Default

    If someone bought these at current ~$58 per hundred the capital gain if held to maturity would be caught by tax when form IR3K is filled, 'Sale and Disposal of Financial Arrangements'.
    Interestingly it seems to me that it is implied that capital losses are tax deductible, which is unusual, as it says the resulting figure must be entered in return without distinguishing between gain and loss. IMIO.

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •