Hi Guy,
GSBG25: You’re view is correct. Obviously the 3.25% in based on the $100 face value, buying it at say $101 will reduce the yield to maturity marginally. The driver of bond prices is the markets view around interest rates. Because the bond offers a fixed rate of return, if the market prices lower rates, bond prices go up, if the market prices higher rates, prices go down. At maturity, holders receive their $100 back. We have bought this as a store of value backing the view that interest rate pricing has become too aggressive, the same view that CBA’s CEO Matt Comyn spoke of yesterday.
VUK: It is extremely cheap when we compare it to Australian banks, however Australian banks are expensive compared to global banks. That’s because they have less competition and are more profitable. We sold VUK due to quality and their outlook rather than valuation. VUK have set out a large digitization strategy to turn them around. In an inflationary environment, this is a challenge. We now expect lower margins and lower profitability that we did previously. We have not been right on this position – we are frustratingly losing money on it, however we think those funds are better directed to MQG & TPG given the current outlook.