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  1. #16
    Ignorant. Just ignorant.
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    Jan 2005
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    Quote Originally Posted by huxley View Post
    Some of the Perpetuals listed out there present and opportunity to capture value if interest rates rise eg the IFT bonds linked to the one year swap rate + a margin of 1.5%pa.. looks like they're currently priced to pay around 5.5% If you think short term rates have bottomed out you could gain on any upside in the future..

    I mention this as anyone thinking of constructing a bond portfolio may want to balance out their fixed interest positions with something like these instruments...

    Any thoughts?
    That's pretty much how I use IFTHA. An inflation hedge. You buy 'em cheap, which gives an acceptable return, but if rates rise, the coupon rate rises too.

    The "buy 'em cheap" part is important. I'd hate to be one of the poor b*ggers who went into these at time of issue.

  2. #17
    Guru peat's Avatar
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    Aug 2004
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    Whanganui, New Zealand.
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    we're currently offering some long dated bonds at 5.7% but despite their maturity out in the 2040's they reset every 5 years at a margin above the 5Yr swap rate and the issuer offers a resale facility and IF they dont find a buyer for your bond at the reset date (or choose to redeem it themselves) then there is another margin applied to the yield

    I actually consider this as a pretty good option for gaining a higher yield - sure they are subordinated and unsecured - but the duration risk is for all practical purposes only for 5 years.
    For clarity, nothing I say is advice....

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