If you look at the attached chart, you will see that the AAA rated bond from Temasek Holdings (Sovereign Wealth Fund of Singapore) offers a better yield than the underlying 10 year US Treasury bond and moves exactly in line with the US Govt bond.
Today, US Treasury 10 year bond yields 3.41%. It had touched a peak of 3.73% on 8 Feb. and has been declining ever since due to strong demand for USD assets and hence this bond continues to rise and its yield decline.
10 year or similar bonds from US Govt are global benchmarks and any yield provided by any corporate or any Govt issued bond adds a risk premium on top, to provide a higher yield. US Treasury yield plus risk premium equals any bonds net return.
As on date, if you buy Temasek Bond maturing in 2019, approx 10 years, actually 8.5 years now remaining, at USD 102.30, it will give you a yield of 3.98% which is way higher than any AAA rated bond as on date.
In addition, as the maturity period comes closer, the yield will continue to approach the 5 year US Treasury yield of 2.16% and then to 2 year Treasury yield of 1.20%.
Once yield declines, price rises, therefore, this bond shall continue to provide higher and higher price or capital gain as time goes by.
Potentially, a AAA rated bond could give 3-5 dollar or percent gain and a yield of 4% which is total of 7-9% in a USD investment just this year.
Since our bank is very comfortable due to the AAA nature and despite the 8.5 year remainder term, this bond may be leveraged upto 3 times, however, I would only recommend one time leverage to extract that additional 2-2.5% yield and not take any additional risk.
PLEASE DO NOTE THAT YOU MAY HAVE SOME FUNDS WHICH ARE MEANT FOR FIXED DEPOSIT KIND OF INVESTMENT AND THIS BOND PROVIDES A VERY STRONG, ROBUST AND AN EXCELLENT ALTERNATIVE, AT THIS POINT IN TIME, FOR ALL SUCH DEPOSIT ORIENTED FUNDS AND TO HOLD THIS BOND FOR A YEAR OR TWO AND OBTAIN ALMOST 4% YIELD (WHICH IS TWICE OUR OWN BANK's DEPOSIT RATE ON USD FOR 1 YEAR of 2% AND ALMOST 4-6 AND UPTO 10 TIMES THAT OF MAJOR INTERNATIONAL BANKS).
On another note, which is related to India....
Most investors believe and say that if Reliance stock goes up, so does Indian stock market and vice versa.
I just wanted to share some facts on such theories which are mentioned in the media and taken as fact by investors.
If you look at the attached chart, you will observe that this was in fact true until early 2009 when markets fell down in 2007 and 2008, however, since that time, Reliance shares have either gone down or remained within a very tight range but the Indian stock market index has continued to rise.
Over the last 10 years, this chart shows that Reliance actually outperformed the Indian stock index, but since 2009 it has lagged the broader market.
This goes to show that the 'other 29' stocks in the Index do have a strong role to play in the Indian stock marrket or any market index for that matter, especially going forward henceforth.
:-)))
ReplyDelete