Dipping my toe into corporate bonds - Advice requested

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  • gadgetmind
    gadgetmind Posts: 11,130
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    EdGasket wrote: »
    Any thoughts what these will do over the next few years?

    They are so over-bought that you're in effect preserving some of the purchasing power of the bulk of your money by accepting that you're going to lose the rest of it.

    This of them as an "RPI minus a bit" investment.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • Reaper
    Reaper Posts: 7,277
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    gadgetmind wrote: »
    I looked again at the Enterprise Inns bond but eventually bought some RECP as the yield was about the same and the cover looked better.
    Interesting, I hadn't looked at that one. The yield is approx 8% at the moment I take it?

    I am going a bit off topic discussing riskier pref shares (note to everybody else only put a small proportion in the dodgy ones) but I did buy Doric Nimrod One (DNA). It means I own a bit of a passenger jet paying about 7.4% yield and potentially a 13% running yield to 2022 depending if they sell the aircraft at that time and if so if they get the hoped for price. They are still at roughly the price I paid. More info in this Money Week article. There are risks of course such as Emirates wanting to keep leasing it and not pranging it!
  • Reaper
    Reaper Posts: 7,277
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    edited 6 December 2012 at 10:26AM
    EdGasket wrote: »
    How do you think Index-Linked gilts would fair though?
    I haven't looked recently but last time I did they were available at a terrible prices. Not tempted at all.

    There are other inflation proof options. RPBX for example which we discussed here:
    http://forums.moneysavingexpert.com/showthread.php?t=3240714

    It has risen in price recently (oh how I wish I had bought more when it had a big price dip!), and I still don't feel all that comfortable investing with RBS, but you might find it worth a look if you are considering something inflation proof.

    P.S. Note it is currently on sale above the par price, so take into account there will be a capital loss at the end of the term if you hold it to maturity.
  • gadgetmind
    gadgetmind Posts: 11,130
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    Reaper wrote: »
    Interesting, I hadn't looked at that one. The yield is approx 8% at the moment I take it?

    Someone flagging it up on MF and also reckons the ordinaries (RECI) are worth a punt.

    RECP is very interesting as it's a dated pref with five years to run. Not strictly allowed in an ISA but I bet they won't notice! It seems the Chairman has been buying both classes for himself and kids.

    Those who do think inflation is coming might like to take a look at INVR. This is an undated Invested pref (rated BBB) that's BoE + 1% and is trading well below par. Current yield is just over 4% but it will heavily gear if/when interest rates go up.

    The big downside is if Investec go south.

    I may try and pick up some of these next year when a lump sum drops my way.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • EdGasket
    EdGasket Posts: 3,503 Forumite
    gadgetmind wrote: »
    They are so over-bought that you're in effect preserving some of the purchasing power of the bulk of your money by accepting that you're going to lose the rest of it.

    This of them as an "RPI minus a bit" investment.

    ...and yet they trend relentlessly up while paying a reasonable dividend/coupon. Just look at the graph for any IL stock.
  • gadgetmind
    gadgetmind Posts: 11,130
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    Yes, IL gilts have had a great run, but how low can yields go? They are already sub-inflationary, so you're relying on IL gilt prices going up further, which can only happen if yields drop even further.

    IL gilts are dangerous *because* they have been over-bought not despite it.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • EdGasket
    EdGasket Posts: 3,503 Forumite
    All other things being equal, if inflation turns out to be higher than currently expected, would they not then continue to rise more?
  • gadgetmind
    gadgetmind Posts: 11,130
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    That depends on how much of their future earnings power people are prepared to lose.

    Plot SLXX, INXG and IGLT over the last year to see why I'm still preferring corporate bonds.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • gadgetmind
    gadgetmind Posts: 11,130
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    BTW, here are current stats for a selection of index linked gilts.

    http://www.fixedincomeinvestor.co.uk/x/ic-bondtable.html?groupid=IndexLinkedGilts

    What do you notice about yields to redemption?
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • EdGasket
    EdGasket Posts: 3,503 Forumite
    Performance has been flat over the past year as inflation is still benign and equity markets holding up. But with everyone printing money like there's no tomorrow to reduce the real cost of debt, inflation or maybe even hyper-inflation will kick in at some point. Then maybe those funds will be due for another leg up.
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