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Originally Posted by Penfold
I have just sold my entire FI portfolio over the past fortnight and bought a house. Worked out quite well with the massive pressure on margin over the past couple of years squeezing up the capital values. Yields are so low now, it almost makes sense to put cash into our own home. Rents are creeping up and a few pressured sellers here in Wellington.
What has my life come too? Looks like weekends will now include a visit to Bunning's.
I was really struggling to find value out there the last year. These APN's are still ok. But for the risk I preferred a few lines of prefs. The Origins, Works, Rabo17s, MTFs and Quaysides. There are all still at relatively good margin. You just have to keep paying attention and be ready to sell.
Yes, I had been mainly putting my bond allocation into prefs/resets for the past 2 years. But with a few maturities of late in the vanilla bonds and the underlying "lower for longer" philosophy on interest rates, 7.5% (or a little less with brokerage!) will do me for now. The issue is not huge and APN seems to have the balance sheet to make repayment in Mar 2016 seem a good bet.
I looked at the GFZ010 issue as well at a similar rate, but the "out" for holders in the current bid seemed a bit hazy. Somewhat better protection built into the APM010's from what I could see.
Still holding a chunk of my bond allocation in cash though, hoping to see some better issues or opportunities to come.
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Was going to suggest the new KIP Fixed bonds, but see they have set at just over 6% for 7 year exposure. Not sure I would go there. Bank step saver accounts would seem a better choice.
There are a few high yield property stocks out there too as a replacement for bonds. I built a decent holding of SCP and FET (ASX). The currency adds another dimension... I just feel the NZD is overvalued. I have had a good run up in capital value with those too. If the AUD strengthens it will make the bonds look even more poor in comparison.
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Thanks for the thoughts, Penfold. Yes, I thought the KIP were looking interesting, but find it hard to put money on any corporate debt issue at less than 7%. I will have a look at SCP and FET - I own CMW over that side, but hasn't done much beyond the divs in the last few years. Still, return is good and comes under FIF, so works for me.
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Oh dear, they are going to repay early - now Sep 2014. However, I think they have to pay a 2% premium to the principal amount for early repayment between the 3rd and 4th anniversary of issue, so at least that will be some compensation.
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