Is buying debt to hold till maturity pretty safe?

[Joshuatree]

A year plus later. As i derisk my portfolio Ive committed a % of my funds to fixed int over various terms up to a year and now starting to look at some bonds too. I see some reccos in previous threads anyone got any picks for the near future that they are looking at/invested in esp ones with discounted better yield that the mkt may not have picked up on that have a good rating cheers JT

[BIRMANBOY]

With interest rates on the rise I wouldn't be looking at any with a long maturity since as interest rates rise bond rates don't look so good (in comparison to other options) and it becomes more likely you will sustain a loss if you sell before they mature. I have been selling off anything that isn't returning at least 8%. As far as new bonds coming out you could find yourself locked into a not very attractive rate if interest rates keep going. If you go for a perpetual such as Works WKSHA for example that resets each year so it has been popular and more expensive to buy...(as interest rates go up so does your return). With perpetuals depends on fine print however. BNZ for example is returning 9.1% odd but is due for reset 06/14 so could be called in and cancelled or could be reset at 5 year cash rate plus 4% plus (cant remember exact figure). So you need to be aware of all possibilities with perpetuals. If you want SAFE you could go with a NZ Govt GOV410 which matures 1923 and pays 4.26% but a term deposit will get you more than that. The Infratil debt securities are probably the more highly returning bonds and at moment range from 5.8 to 6.4 yields. Personally I think its not such a good time to be looking at these (any) bonds as investments and you can do better by going for good long term divvy producers (well I would say that wouldn't I?). There are plenty to choose from that will give you a better return and they shouldn't be any more risky than various bonds. DYOR as usual.

A year plus later. As i derisk my portfolio Ive committed a % of my funds to fixed int over various terms up to a year and now starting to look at some bonds too. I see some reccos in previous threads anyone got any picks for the near future that they are looking at/invested in esp ones with discounted better yield that the mkt may not have picked up on that have a good rating cheers JT

[Dubdee]

The only direct risk in holding bonds to maturity is the risk of non payment. As the GFC showed this sometimes can be non trivial but the risk can be mitigated by investing in a moderately issue diverse portfolio. There is a second degree risk in opportunity cost of holding to maturity. If interest rates rise further this may occur but in my opinion only in the short end of the maturity range.

One downside of bond investment for non traders is the asymmetry in the tax treatment.All gains are on revenue account but any loss which relate to the credit worthiness of the issuer may be non deductible if you are not a trader.

Bonds are preferable to term deposits of a similar profile as they are reasonably liquid. many good one are not NZX listed

[kiwitrev]

Josh.
Have a look at WKSHA discussed elsewhere on this site. They are perpetuals reset ea. 30 June at 4.05 over 1 tr swap. With expected rising interest rates these should be a good hedge. It's not a finance coy but just a mechanism to channel funds to Downer which stand behind the debt.

[Cricketfan]

One of my PIE term deposits has matured and I'm thinking about investing some of it in bonds. Anyone know if there are any new issues coming up that sound decent?

[kiwitrev]

What I look at re possible new issues is the maturity date of existing issues on the DX market. There are quite a few coming up in the next little while which you could reasonably expect to re-issue and most of these are "solid" companies.