Talking Bonds with Income Asset Management
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.