TINA is a word bandied about in broking circles over the past decade as our interest rates declined towards zero. TINA isn’t a fictional woman or even a real person, it’s an acronym that stands for “There Is No Alternative,” meaning equities.
This ended in 2022 and with investment grade bonds trading at over 6%, now could be the time to have a look at investing in bonds!
In this episode of Investing with Rich, I talk all things fixed interest and bonds with the specialists. Jenna Labib is an executive director and Matthew Macreadie, a credit strategist and portfolio manager from the ASX listed group Income Asset Management (ASX:IAM). Welcome Under the Radar!
Here are some highlights:
• Bonds explained. The risks and how to buy them, using IAM’s OTC market.
• What are the different Bond types – fixed coupon, floating rate notes, capital index bonds, indexed annuity bonds etc.
• What does inflation mean for bonds?
• Bank hybrids do pay franking credits but have far more risk than you’d expect – think the contingent convertible capital instruments (CoCos) also known as Additional Tier 1 Capital (AT1) bank hybrids issued by Credit Suisse. They lost 100% of their value, while Credit Suisse shareholders didn’t.
• Why the new asset class, Tier 2 bonds, are worth looking at for value. These bonds sit above hybrid but below senior unsubordinated debt and provide better returns, albeit with slightly more risk (but a lot less risk than hybrids).
• Why Investment grade bonds are preferred over high yield bonds during this time of market instability.
• Investment grade bonds that you can buy with 6-7% yield versus the Australian Government 5 year bond yield of 5%.
• Which bonds do you buy? From CommBank (ASX:CBA) to UBS, Find out about 5 bonds with varying risks, which the team at IAM recommend.
• Find out why you’re better off taking control of your future by buying bonds directly, instead of through an ETF.
Richard Hemming
Head of Research, Under the Radar Report
