Re-sets vs Fixed Rate...

[Lizard]

What do the experts think? Is it time to swap the Fixed rate securities (e.g. FCG010) for the now discounted re-sets?

(and, if so, which re-sets?). I've bought into a few re-sets prematurely (and lost more money), but haven't sold any of the fixed rate ones - except the GFN030's (doubt they'll have sufficient cash in time to redeem them all and don't fancy getting a roll-over or GPG shares in current situation).

Thoughts?

[macduffy]

I don't have a view on your question, Liz ( time to swap fixed rates for re-sets?) - but for what it's worth, Macquaries estimate GPG's net cash on hand, after settlement for the TUR shares, at $108.5M. (Cash $513.4m minus Cap Notes $404.9m ).

Doesn't leave much for a capital distribution, without further asset sales, which leads me to believe that a specie distribution of the Coats shares is a real possibility. But that's another issue!

[Lizard]

I don't have a view on your question, Liz ( time to swap fixed rates for re-sets?) - but for what it's worth, Macquaries estimate GPG's net cash on hand, after settlement for the TUR shares, at $108.5M. (Cash $513.4m minus Cap Notes $404.9m ).

Doesn't leave much for a capital distribution, without further asset sales, which leads me to believe that a specie distribution of the Coats shares is a real possibility. But that's another issue!

Well it seems to me from what they've said to date, that it might be a big assumption that they repay the 030's and don't just offer a rollover package that might force holders into converting if they want out... then again, there is a clause for the trustee to request repayment if GPG is in liquidation...does it only count if liquidators are actually appointed rather than management liquidating?

Anyway, with them trading above face value, I decided not to stay around to find out.

[Penfold]

I sold off my Genesis fixed bonds today... and last month bought Infratil and Origin floaters (second tier stuff not for everyone). The swap curves are steepening and the floaters are starting to look cheap. That said it could all unwind tomorrow. The buy orders are building for a lot of the floaters...

There's still some fixed bargains out there too... got some of the PINSA last month. Yielding 15% to maturity (capital guaranteed by the RBS/UK gov). And the APN bonds yielding 11% recently have suddenly been bid in to 10%.

You need a strong stomach for some of this stuff.

If you want to stay fixed you could go TD's. They are pricing 100 over for a 150 day exposure. If rates continue climbing, at least you won't take a battering.

[D B Cooper]

Yes I think it is time to stock up on discounted resets. We have reached the bottom, and the only way is up from here. I purchased some IFTHA at 0.54 which I think is a bargain. Also good to diversify your portfolio with a mix.

Thanks for the heads up on possible repayment issues on the GFN030s. I had not thought there would be any problems with repayment.

Disc: Hold IFTHA and GFN030

[Lizard]

There's still some fixed bargains out there too... got some of the PINSA last month. Yielding 15% to maturity (capital guaranteed by the RBS/UK gov). And the APN bonds yielding 11% recently have suddenly been bid in to 10%.

You need a strong stomach for some of this stuff.

Yes, I got some of the PINZ B (PNZFB) the other day at 83c for a 9.8%pa to maturity (less brokerage). Lower rate but longer period - Jan 2014 instead of 2013. Think Barclays are guarantor there.

Yes I think it is time to stock up on discounted resets. We have reached the bottom, and the only way is up from here. I purchased some IFTHA at 0.54 which I think is a bargain. Also good to diversify your portfolio with a mix.

Thanks for the heads up on possible repayment issues on the GFN030s. I had not thought there would be any problems with repayment.

Thanks - yes, I have some IFTHA at progressively lower prices, but since they are down still further, I could probably buy some more... The finer points of some of fixed interest vs the achievable returns must make them only for masochists! No wonder Aussies don't generally have much in bonds in their super funds (according to the typical portfolio mix Old Rider posted elsewhere).

I am just being ultra-cautious with the GFN030's - just my reading of the way they were dividing the cash in the last report did not imply funds for full repayment unless further major asset sales were achieved. Given their comments on issues around some of their bigger holdings, it did not sound too likely that those were imminent and therefore likely to settle in time, but it is early days.

[GTM 3442]

Definitely not an expert, Lizard.

But perpetuals are a part of my holding - after all, IFTHA at $0.54 is yielding about 7.5%, which is worth having.

There remains the risk if further interest rate cuts - remember that NZ has a relatively high OCR - and subsequent capital loss.

And there is the "inflation" scenario. Over time it will become politically impossible for governments to pay their debts by continued austerity, and the option would seem to be paying their debts by inflation. With the accompanying capital gain (albeit inflation-eroded).

So the question may become one of the proportion of fixed/floaters, rather than a choice between them.

[GTM 3442]

Ah, Lizard, you asked for suggestions too. How about the ANZ's ANBHA's ? You'll have to wait until after the 2013 reset, of course.

[Penfold]

Ah, Lizard, you asked for suggestions too. How about the ANZ's ANBHA's ? You'll have to wait until after the 2013 reset, of course.

Been watching those lately. ANZ can call in 2013. Pricing would suggest others think this will happen (or maybe they are just short-sighted and focused on the current yield, so not selling). But lately its margin has moved out a little. Makes you think you may be holding them until 2018 with a coupon around 6%. That seems crazy to me given these look to be a shade above equity. I would look elsewhere unless you know the call is 99.9% likely.

[Lizard]

Penfold, I think that is what GTM is suggesting by saying I wait till after 2013... i.e. that they will then trade well below face value.

I'm aware of these, as my mother has a few.

Which brings me to the question as to where most of you find your information on bonds/notes/prefs and, in particular, the important part - what happens on "maturity" and/or what the rights of holders are to repayment?

I find this quite difficult - some bonds prospectus' can be found on the companies office, but this is not always the case. Also, to identify the prospectus usually means identifying first the date the bond was issued - this used to be on the NZX web-site for listed bonds, but now is not. So I end up going back through the "news" on Stocknessmonster, trying to find the issue date first and then looking on the companies website - mostly successfully, but not always.