Skip to Content
scroll

What bond duration does MM like?

Advanced Search

Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

Ask a question

    The Latest Q&A

    Question asked

    What bond duration does MM like?

    Hi guys, Appreciate the work which goes on and the way the reports are written. I know its not your area of specialty, but; can you offer any advice as to purchasing bonds of various nature. Where, how and minimum sizes? I have noticed that I'm starting to see company bonds stating 4.5%, I may consider this for safer investments. How do you see company bonds compared to the hybrid or convertible notes? Another quick question, I read you had your kids investing already, how do you keep them interested? I'm in the same boat, where I have my kids of a similar age aware about investing, but trying to keep the interest there is difficult. (PS - the bonds are for their school fees which is why the safer investment is important or my wife will kill me) Regards,

    Answer

    Hi Simon,

    We do have some experience on the bond side and do include them in some portfolio’s I manage through Shaw and Partners (that are mandated to hold them). RE yields, I have noticed the same in recent weeks, an email to me from a bond broker yesterday read…We have just received 300k cheap supply of the PacNational-3.80%-08Sep31 bond at a discounted price of 91 paying a respective yield to maturity of 5.007%.

    That means that a bond listed in September of 2021 at $100 is now trading at $91 now. That will be true right across the bond market. The main difference to bonds generally versus hybrids is that Hybrids are floating rate in nature, they will not sell off simply because interest rate expectations go up, whereas bonds will. We have been very careful not to hold fixed rate bonds in our income portfolio for that reason.

    With rates rising, we still have a preference for floating rate securities however anticipate changing that stance over the coming year or so an higher rates becoming fully priced in.

    As for the kids I’ve found that if they own shares in businesses they use frequently it reinforces it. i.e. when we stop and buy an ice cream at the IGA they trigger that they are helping their shareholding in Metcash!

    As for school fees they’re up there with death and taxes in that they’re only going one way!

    chart
    image description
    Australian 10 Year Bond Yields
    image description

    Relevant suggested news and content from the site

    image description
    Overview
    image description
    A discussion with Geoff Wilson – Wilson Asset Management & James Gerrish – Market Matters
    image description
    Thursday 17th April – ASX +24pts, CGF, BHP, STO
    image description
    Major Movers Today
    image description
    Ausbiz: Research Lead Shawn Hickman discussing Copper
    image description
    Thursday 17th April – Dow -699pts, SPI down -26pts
    image description
    Stocks This Week – Source Bloomberg
    image description
    Wednesday 16th April – ASX +20pts, BOQ, RIO, ZIP
    image description
    Sectors This Week – Source Bloomberg
    image description
    Wednesday 16th April – Dow -155pts, SPI down -3pts
    Members only

    UNLOCK MARKET MATTERS NOW

    Take a free trial.

    No payment details required.

    Already a member? Click here to login
    Back to top