gentlegreen
I hummus, therefore I am ...
Thanks for the offer, but I think I'll buy a few thousand lottery tickets instead.
Have money to invest long term? Want a guaranteed return? Know me? Lend me money!
- Thread starter ChrisFilter
- Start date
kabbes
First intersubjective, then internalised
gentlegreen, the yield curve is really, really skewed right now. Short term rates are minimal (although money market rates are very high, because nobody trusts the financial institutions) but the liquidity premium on long term bonds are astronomical.
Chris is essentially offering a three year bond -- a shorter of the medium terms. I have Monday's FT in front of me, as it happens. Yields for investment grade bonds maturing in 3 years are about the 4.9% mark (3.5% spread on government bonds!). There's two year bonds in Band America, JP Morgan and France Telecom at 7.22%, 5.18% and 4.09% respectively, with a three year in Petronas at 4.90%.
However, Chris would not be investment grade. He'd be "emerging market" at best. These are some contenders:
Gaz Capital (BBB rated) -- 1.5 year, 8.1%
Fiat Fin (BBB) -- 2 year, 6.3%
Gazprom (BBB) -- 4 year, 12.89%
Kazkommertsbk (BB) -- 4 year, 43.74% (no that isn't a typo).
Gives you an idea of the step up. So what do you think Chris's chances of default are? A BBB rated bond should have about a 5% chance of default in 10 years, IIRC. Is he as good as that? Or is he 10% in 10 years, which would be down more towards the B rated, which is worse than all of those bonds?
Chris is essentially offering a three year bond -- a shorter of the medium terms. I have Monday's FT in front of me, as it happens. Yields for investment grade bonds maturing in 3 years are about the 4.9% mark (3.5% spread on government bonds!). There's two year bonds in Band America, JP Morgan and France Telecom at 7.22%, 5.18% and 4.09% respectively, with a three year in Petronas at 4.90%.
However, Chris would not be investment grade. He'd be "emerging market" at best. These are some contenders:
Gaz Capital (BBB rated) -- 1.5 year, 8.1%
Fiat Fin (BBB) -- 2 year, 6.3%
Gazprom (BBB) -- 4 year, 12.89%
Kazkommertsbk (BB) -- 4 year, 43.74% (no that isn't a typo).
Gives you an idea of the step up. So what do you think Chris's chances of default are? A BBB rated bond should have about a 5% chance of default in 10 years, IIRC. Is he as good as that? Or is he 10% in 10 years, which would be down more towards the B rated, which is worse than all of those bonds?
gentlegreen
I hummus, therefore I am ...
want !
so that's pretty risky then ?
(I'm saving to buy a small French smallholding 10 years from now)
EDIt - kazakhstan !
kabbes
First intersubjective, then internalised
Heh. Kazkommerstbk was the only name I didn't actually recognise. Now I know why.
It's still BB rated though, which should only mean about 6.5% default risk over 4 years. It just goes to show how much the premiums for unknown credit risk and liquidity are biting.
It's still BB rated though, which should only mean about 6.5% default risk over 4 years. It just goes to show how much the premiums for unknown credit risk and liquidity are biting.
gentlegreen
I hummus, therefore I am ...
so that's a potential income of 43.74% weighed against biting your nails for 4 years in case you lose the lot ?
ChrisFilter
Like a boss.
I reckon I'm a pretty safe bet.. £1500 a month back that goes straight into a savings account and earning interest thereon.
Anyway, decided I can't be doing with parental interference, so I'll just have to keep snowballing the debt. Why was I so stupid in my youth?!
Anyway, decided I can't be doing with parental interference, so I'll just have to keep snowballing the debt. Why was I so stupid in my youth?!
kabbes
First intersubjective, then internalised
That's right. It matures April 2013. 8.5% coupon with a bid price of 35 per 100 nominal. In US$. Somebody must know something, though, for it to be priced like that.
ETA: Actually, having reread what you said, no you haven't quite got it. It's not a potential income of 43.74%. It's a potential return of 43.74% per year compound.
g force
Affects Shatner's Basoon
I reckon I'm a pretty safe bet.. £1500 a month back that goes straight into a savings account and earning interest thereon.
Anyway, decided I can't be doing with parental interference, so I'll just have to keep snowballing the debt. Why was I so stupid in my youth?!
Because youth is the time to be stupid!!! It's called "life"
kabbes
First intersubjective, then internalised
Have you produced a detailed business plan plus balance sheets and profit and loss for the last three years?
AnnO'Neemus
Is so vanilla
You mention your wife's past financial irresponsibility.
But wouldn't trying for a baby in a couple of months time, which would lead to a loss of income and increased outgoing, when you already owe so much money, and make you both irresponsible in the present?
I mean, accidents are accidents, but to actually plan to put yourselves in that situation?
How old are you both, can you not delay trying for another year or so until your finances are in a more stable state?
ChrisFilter
Like a boss.
You mention your wife's past financial irresponsibility.
But wouldn't trying for a baby in a couple of months time, which would lead to a loss of income and increased outgoing, when you already owe so much money, and make you both irresponsible in the present?
I mean, accidents are accidents, but to actually plan to put yourselves in that situation?
How old are you both, can you not delay trying for another year or so until your finances are in a more stable state?
Oh, don't get me wrong, I'm in control of our finances. We both earn very well and she gets 6 months maternity full pay. If we start trying in 3 months, that's 18 months before we have to consider a single salary. By then I'll have snowballed our debts down to one monthly payment of about £300 which is affordable on my salary alone.
I'm not saying we can't afford the debt, just that a single, flexible payment that profits someone other than the banks would be nice.
Besides, financially there's never a good time to have a baby. This forum told me that
(I'm 27, she's 34)
Funky_monks
Neo-Rustic
You attribute considerable talents to your sperm, young man.
(You might not fertilse her first go, you know)
AnnO'Neemus
Is so vanilla
Why are you saving 1,500 a month? The interest that you're earning is probably less than the interest you're paying on debt. Instead of saving 1,500 a month, you're probably better off using that to pay off the debt.I reckon I'm a pretty safe bet.. £1500 a month back that goes straight into a savings account and earning interest thereon.
Anyway, decided I can't be doing with parental interference, so I'll just have to keep snowballing the debt. Why was I so stupid in my youth?!
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