Icap to launch retail bond paying 5.5pc interest

strawberrylane

anilkumar3 wrote: »

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% ?

ICG is Intermediate Capital Group, nothing to do with ICAP.

gadgetmind

strawberrylane wrote: »

ICG is Intermediate Capital Group, nothing to do with ICAP.

I suspected ICG7 was a different company but couldn't find much about it in a hurry. The article I referenced earlier mentioned that bond but didn't go into details other than to note it was a lower rating.

anilkumar3

@Strawberrylane

Of course you are right.My mistake in getting the two companies mixed up.Sorry.

sabretoothtigger

I deal with ICAP everyday. They are a great big broker dealer type company, big finance and probably a hedge fund I think.
You could contrast them to EMG LCG IGG as operating in similar business. The yield on EMG is 20% who are more risk based I think

The average daily transaction volume for ICAP plc exceeds US$1.5 trillion, more than 60% of which is electronic.

Icap is more transactional then management risk that comes from the perspective EMG bears

Quite a bit different from the Tesco bond, Im surprised if this was over subscribed.
I think Icap is looking to expand, I forget what it was now but they are fairly sensible I think but who can ever tell for sure

http://en.wikipedia.org/wiki/ICAP_(company)

Much more interesting was the RPI adjusted bond +1.5% by wessex water ? I think they or some other utility was issuing that, seems attractive

strawberrylane

Severn Trent, 10 years, RPI+1.3% coupon?

sabretoothtigger

yea, check that one. Isnt their rating much higher?

TheInvisibleFinger

ICAP PLC Baa2/BBB+
Severn Trent PLC Baa1/BBB-

ie slightly better with one rating agency, slightly weaker according to another.

Also UK inflaiton is expected to average 2% per annum over 5-7 years, so inflation plus 1.5% would suggests a yield of 3.5% over 7 years as opposed to 5.5% over 6.5 years with this one.

Against that, 5.5% Fixed woudlnt look so attractive in a rising interest rate environment, while inflation plus 1.5% would (trivially) keep pace with rising market interest rates / inflation expectations, if thats a concern.

sabretoothtigger

Also UK inflaiton is expected to average 2% per annum over 5-7 years

Well expected and hoped for have converged when it comes to government issuing debt. We should exceed expectations so long as this country imports, if we made it ourselves then the high unemployment would suggest low wages for quite some time and so low inflation.

I would say anyone who is a savings refugee running from 0.5% and considers corporate bond investing as an alternative; should be more inclined to inflation protection as its alot less risky then a normal bond which can be washed out by inflation.

If we had 5% inflation per year I dont think it'd even make the top headline on the news, its very possible for petrol and other costs to rise. To me it is expected because we import those things, can they keep down housing costs to balance it enough Im not sure

Sceptic001

strawberrylane wrote: »

Severn Trent, 10 years, RPI+1.3% coupon?

Note it is NOT RPI+1.3%, it is a starting coupon of 1.3% rising (or falling) in line with RPI.
https://forums.moneysavingexpert.com/discussion/4032189

TheInvisibleFinger

sabretoothtigger wrote: »

Well expected and hoped for have converged when it comes to government issuing debt. We should exceed expectations so long as this country imports, if we made it ourselves then the high unemployment would suggest low wages for quite some time and so low inflation.

when I say 'expected' I mean 'anticipated and discounted in the wider UK inflaition linked bond market.'
IF you think (as I do) that everyone's got it wrong and inflaiton will come in higher than that then those bonds are for you. You have to believe taht severn Trent credit risk is adequatly compensated for too of course