Icap to launch retail bond paying 5.5pc interest

gadgetmind

afwone wrote: »

I don't fully understand these products

Awooga, awooga, alert, alert! Don't invest in things you don't understand. These bonds aren't particularly complicated (though some are!) so do some reading, ask some questions, and make sure you understand the risks.

The main risks are the the bond issuer defaults (total loss situation = bad) or that interest rates rise, which means your bond has less value both to yourself (risk without extra reward) and to others (less value if you want to sell before redemption).

Masomnia

Spain, Ireland and Italy are also rated BBB+ so that may give you some idea of the company's creditworthiness :eek:

They pay a higher coupon too

LardyCake

jingleberry wrote: »

...I assume that, if held in an ISA initially, they can continue to be held therein (and interest will continue to be paid gross) once the remaining term falls below 5 years?

Yes.


Now I know a bit more about ICAP I would want a much higher yield than 5.5% before considering these.

You might be interested in this site: http://www.londonstockexchange.com/exchange/prices-and-markets/retail-bonds/retail-bonds-search.html
were you can look at the full list of retail bonds on offer.

jingleberry

LardyCake wrote: »

Yes.


Now I know a bit more about ICAP I would want a much higher yield than 5.5% before considering these.

You might be interested in this site: http://www.londonstockexchange.com/exchange/prices-and-markets/retail-bonds/retail-bonds-search.html
were you can look at the full list of retail bonds on offer.

Thats very useful thanks LardyCake

gadgetmind

These guys like it -

http://www.fixedincomeinvestor.co.uk/x/analysis.html?type=bond-of-the-week&cat=analysis-comment

TheInvisibleFinger

Typically, a savings account will pay interest periodically, as it accrues and falls due. A bond will do the same, and call it 'coupons.'

In general, neither prospect guarnetees that you will be able to reinvest those interest/coupon flows at a given rate. You are entirely subject to the market rate of interest that applies at the time. That is, neither offer you a guaranteed 'compounding or rate.

Reading the small print, this bond's rate of interest is certainly 5.5%, unless the issuer gets downgraded below investment grade, at which point it jumps up another percent or so. Those numbers tell you what coupons will be due, but make no promises about what rate your bank will pay you when you seek to put them into a deposit account or ISA (say).

anilkumar3

Few Thoughts:
1.ICAP equity shares yield 7.8%,but share prices are more volatile than bond prices.
2.Countries such as Spain,Italy etc with the same rating BBB+(which is regarded Investment Grade)are actually bankrupt NOW.ICAP is not bankrupt now and making profits.
3.As it seems issue will be oversubcribed and money will be raised.With this extra cash in the bank,is the company finacially more financially strong or weak?
4.There is an active after market in retail bonds and its easy to 'exit' if there is a premium(as has been the case in ALL recent issues).
5.Yes,a higher coupon would have been more appropriate but they are counting on the huge demand for yield.
6.Would be good to get more information on those very high yielding preferance shares

anilkumar3

And ya,I noticed ICAP (ICG7.L)7% 2018 yields 6.66 % at 105.Any body know why this shpuild not be a better buy than the upcoing issue at 5.5% ?

gadgetmind

anilkumar3 wrote: »

Any body know why this shpuild not be a better buy than the upcoing issue at 5.5% ?

Longer dated usually has higher yields because there is longer for the company to default and longer for the principal to lose value due to inflation. I'm no great expert, but this is the basis of bond yield curves.

Other issues can be buried deep in the prospectus of the bond, which is why fixed interest is hard work.

anilkumar3

Thanks.

Points noted.
But a market exists also for the longer dated Bonds.So they can be sold too if one wishes to exit.
Not therefore clear yet in my head why the more than 1% yield differential.Of course with the new issue no initial buying charges are payable and so one set of savings in cost.