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  1. #11
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    Dubdee so they will be trying to buy as many as they can at 85c then
    Possum The Cat

  2. #12
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    One would think so particularily as the profit between purchase price and sale price ($1.00) goes straight to tier one capital as profit.

    The issue for them is though can the replace it with other tier one capital at a sensible price. This may not be the case so RBOHA might well stay of foot without a buy back. So I am not predicting a buy back but a convergence to par over the time to first call.

    So you can treat these more as a bond than a perp.
    Success is the ability to go from one failure to another with no loss of enthusiasm

  3. #13
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    why would nan need the principal? Ultimatly nan needs contiunous income over a period of until death. Perpetuals provide that. Other assets in the portfolio can be sold or other parts of her portfolio can be used to fund large costs that can't be borne by income (medical bills, new car etc).

    If I was nan I would hope the perpetuals never are called. Very hassle free.

  4. #14
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    The bigger problem for Nan might be the sub-ordination of these instruments.... Worth adding they are still highly rated. And if Rabo collapses the world has a big problem.

    And there's also this "From 8 October 2017 the rate will be reset quarterly at the same margin over the 90 day bank bill rate". If they don't call them for some reason, you are going to take a big capital hit, and reduced interest.

    This non-vanilla stuff is best left to investors rather than nans... and after looking at these last year, I am not convinced the interest and likely call in 2017, are compensation enough for the risk they may not call them.

  5. #15
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    Yup, "Nan's" investment from a mere two or three weeks ago has lost 5 cents of its capital value - 85.5 to 80.5 - thats more than she is going to earn over the next year in interest, before she pays any tax, so lets say she'd break even in two years after tax

    lookin' good?

  6. #16
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    Two resets re-priced today and both saw interest rates fall again - IFTHA to 4.22% (from 4.99%) and ASBPB from 4.78% down to 4.0%. However, it's an unpredictable process as benchmark has been up and down over the last year and at one stage looked like they might head higher. Still, term deposits have mostly come off too, unless investing with remaining finance companies and opting to reinvest at the considerably higher risk of "no guarantee".

    Re Rabobank, I'm afraid I'm going entirely from memory here, so maybe wrong, but I thought the PIIGS sovereign debt exposure was about €490m or so last I looked on assets of €6.2bn. Enough to cause some stress to equity levels if it was all written down, but would have to be pretty extreme scenario. Worst exposure though would be to private mortgage debt which was over 40% of assets - although think they would probably have a reasonable pick of "good" mortgages and avoid the worst. Obviously, enough extreme scenarios, every bank ends up nationalised and haircuts all round. But would have to hope the ECB finds a printing press before things get quite that extreme.

    I don't see the harm in having a few re-sets to offset the fixed rates for those of us with below average foresight having to make decisions about where to invest. All scenarios at the moment involve making predictions as to which direction overseas leaders will jump when the train gets close enough. And there are many investors that need more than the 3% of an on-line call account to avoid eroding capital in the need for income while we wait to find out. The scenarios where RBOHA actually take a defined haircut would have to be pretty extreme, although given they don't have a maturity date, there is probably increased odds they will live up to their perpetual name for the next 10 years....the whole point is to give Nan income so she doesn't have to sell the notes for income in the meantime.

  7. #17
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    Never say never, but Rabo would be the last bank standing globally IMO - they are a pretty unusual bunch, with impeccable credit standards.

    I know what everyone is saying: all Nan is concerned about is an annuity stream. My point is if she ever needed to bail out for any reason, she is currently down the dunny, in a matter of mere weeks from (virtual) entry

  8. #18
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    Quote Originally Posted by Xerof View Post
    I know what everyone is saying: all Nan is concerned about is an annuity stream. My point is if she ever needed to bail out for any reason, she is currently down the dunny, in a matter of mere weeks from (virtual) entry
    The difficulty is, where isn't that the case with income? It just isn't possible to get a liquid investment that you can be certain of being able to withdraw funds from without opting for a call account of some sort, and the returns just aren't there for most peoples income needs. Always going to be a balancing act between risk, return and liquidity - not to mention hidden costs and returns around inflation vs deflation.

    But yes, I guess you are right in pointing out that the market value on price-traded perpetuals/resets is probably more volatile than for most yield-traded fixed rate bonds over a short period.

  9. #19
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    Well, the market keeps talking - Nans (virtual) investment keeps getting hammered in price, now down another 3.5 cents since last week.

    Far more volatile than your regular fixed term bonds, most of which have barely blinked (yet).

  10. #20
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    Can't buy a trick these Perpetuals......Nan's buried......

    For wonderful spin, take a read of their announcement today, where they were DOWNGRADED from AAA to AA

    Rabobank retains its position as the world’s highest rated
    privately owned bank according to Standard & Poor’s new
    methodology
    Rating agency Standard & Poor’s (S&P) today announced its new ratings for the top 37 global banks according to its new methodology. S&P has awarded Rabobank the highest rating of all these 37 banks: AA with a ‘stable outlook’.
    Rabobank previously held a AAA rating based on the former approach used by S&P. As is the case at Moody’s, Fitch and DBRS, Rabobank remains the highest rated privately owned bank in
    the world according to S&P. Rabobank views S&P’s new rating as a reconfirmation of its stability and strong creditworthiness.
    They must use the same firm as Heartland.......

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