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Hate the equity, don't hate the bond
Shareholders may feel like they've been on a roller-coaster, but what has the experience been for bondholders?
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Many advisers look through the list of XTBs and comment "I don't like that company" or "I wouldn't invest in that company". But these comments generally reflect views on a company's equity rather than their bonds. In fact this view highlights a core difference in thinking between equity and bond investors. We use the recent negative sentiment AMP has experienced to look closer at how this has played out for AMP equity compared to one of their bonds.
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Alumina's recent upgrade...What it means to bondholders
Alumina back to investment-grade rating
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Alumina was downgraded two notches below investment grade on 21 Sep 2016 and as a result the coupon moved from 5.50% to 7.25%. After it was upgraded on 7 Apr 2017 the coupon reduced to 6.75%. Last week, it was further upgraded back to investment grade and the coupon reduced back to 5.50%. As a result of the upgrade on 16 May 2018, coupons between now and maturity have reduced to $2.75 per XTB each six months.
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Deloitte Access Economics: Corporate Bond Report
Identifying Australia's growing appetite for corporate bonds
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According to recent reports by Deloitte, corporate bonds have significantly more growth potential than equities. 37% of bond investors intend to invest more compared to 23% for share investors. (Source: Deloitte ASX Share Ownership Survey)
Now's the time to help your clients understand bonds
With 70% of investors saying they don't understand corporate bonds enough to invest, now is the perfect time to start introducing your clients to this asset class. We have plenty of educational material available for you to use. Contact your XTB Regional Manager for more details. Get your clients ready to start taking advantage of this growing market.
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BBSW soars while TD rates stagnate
BondAdviser Term Deposit Report: April 2018
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BondAdviser’s April TD review shows TD rates across all terms have not changed, vs significant increase in BBSW. BBSW usually sits about 25bps above the cash rate, but in 2018 has added another 25bps and has been around the 2% mark for some time now, driven by offshore markets. Floating rate XTBs move in line with BBSW so their returns have benefited from these elevated levels of BBSW.
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Take a hike running yield
We look closer at why running yield isn't the best measure for bonds
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Many equity investors are familiar with the term ‘Dividend Yield’. They would most likely consider dividend yields when buying shares. The same concept exists for bonds - it’s called ‘Running Yield’. They’re both similar concepts – how much cash flow (dividend or coupon) am I going to get back for every dollar I invest? So why isn't running yield the best measure when considering fixed-rate bonds?
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F01, F03 & BOQ
YTMF01, YTMF03 and YTMBOQ mature in June. Now's the time to talk to your clients about reinvestment.
For Floating-rate investors F09 and F10 have the same coupon payment schedules, so could provide sensible replacements.
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Investment Returns
For clients invested in any of the maturing XTBs, requesting an Investment Return Calculation can help demonstrate that their investment performed as predicted.
Click on the image to request a personalised investment return.
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GLOSSARY: Interest Margin
The fixed spread or premium above the Reference Rate that is payable on the Face Value of an FRN. The Interest Margin is set at the time of the pricing of the bond. View our glossary for more terms
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Interactive tools & calculators
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Cash Flow Tool
Build a portfolio of up to 10 XTBs and chart coupon payments and total return. With pre-loaded XTB portfolios, it only takes 3 clicks to visualise the income your clients could receive from XTBs.
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Interactive XTB Table
The Available XTBs table lets you filter by Company, Maturity Date, YTM and much more. Click on table headers, or use the filters to narrow your selection and build an XTB portfolio on the fly.
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23 MAY: YTMCTX - Caltex 7.25% 23 NOV 2018
23 MAY: YTMSG2 - Stockland 4.50% 23 NOV 2022
25 MAY: YTMSG1 - Stockland 8.25% 25 NOV 2020
29 MAY: YTMDOW - Downer 5.75% 29 NOV 2018
03 JUN: YTMANZ - ANZ 3.25% 03 JUN 2020
06 JUN: YTMF01 - AMP BBSW+0.87% 06 JUN 2018 - MATURING
12 JUN: YTMF03 - BOQ BBSW+1.00% 12 JUN 2018 - MATURING
12 JUN: YTMBOQ - BOQ 4.00% 12 JUN 2018 - MATURING
Keep up to date with XTB coupon dates on our website calendar, or follow us on Twitter or LinkedIn.
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18 MAY: Virgin Australia prints A$150 million in 5-yr non-call 3-yr domestic transaction
18 MAY: MUFG Sydney prices A$300 million one-year domestic FRN
18 MAY: Resimac prices A$750 million Premier Series 2018-1 RMBS deal
17 MAY: Barclays to meet Australian dollar debt investors
KangaNews has an excellent summary of the latest bond transactions: View here
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If you have any questions on the content included in Yield Matters or need help with anything regarding XTBs, please contact us on 1800 995 993 or email advisers@xtbs.com.au
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