Have you miss out USD58k (SGD82k) profit opportunity?

After Donald Trump was elected as President of United States, many analysts start to throw in bearish predictions on bond market in anticipation of rising interest rate.

Articles such as:

30 years bond bull market is over:
https://www.google.com.sg/amp/s/www.forbes.com/sites/adamsarhan/2016/11/16/is-the-30-year-bull-market-in-bonds-over-ray-dalio-other-hedge-fund-managers-think-so/amp/

Bond bubble could burst with explosive impact:
https://www.google.com.sg/amp/s/amp.theguardian.com/business/nils-pratley-on-finance/2016/nov/14/bond-bubble-donald-trump-us-tax-cuts-spending-deregulation

Sell all your bonds:
https://www.caseyresearch.com/articles/doug-casey-sell-all-your-bonds

Investors who follow such bearish call ignores the fact that bonds provide recurring income to the portfolio and it is the few instruments in investment world that will pay you back principal amount at a certain date (if no default at call date or maturity date).

Ideally bond buying opportunity presents itself when there are elements of depressed, uncertainly or temporary problem. That is when we can buy bonds below par or below its historical average trading price.

For non-bank bond issuers, we prefer to invest into bond issuers that are profitable and relatively low debt to equity to reduce default risk.

Default risk can be further reduced by only investing into investment grade bonds.

There are still a lot of profit opportunities in the bond markets.


Below are our bond closed trades since start of 2017:

BPCE 4.625% 11APR2024: PROFIT USD4,676:
- On 11Apr2017 we had call to buy BPCE 11July2024 at 101.00.
- That was before French election where there was uncertainty in the market. That's when we can find value in French bonds.
- Bond price has moved up to resistance level. We decide to close this trade at 102.40. Profit is USD4,676.
Link: myasiaprivatebank.blogspot.sg/2017/05/bpce-4625-11apr2024-profit-usd4676.html

GLOBAL LOGISTICS PROPERTIES 3.875% 4JUN2025: PROFIT USD8,315:
- On 18 January 2017 we had proposed to buy Global Logistics Properties 3.875% 4Jun2025 at 93.50.
- Bond price was depressed as the company was undergoing process of being acquired.
- This bond is trading at 96.00. Profit is USD8,315.
Link: myasiaprivatebank.blogspot.sg/2017/05/global-logistics-properties-3875.html

AVIVA 4.375% 12SEP2049: GBP11,068 PROFIT:
- On 22 Dec 2016 we had call to buy Aviva 4.375% 12Sep2049 at 97.00.
- Political unstability in UK had pushed GBP bond price down.
- This bond is trading at 101.00. Profit less loan interest is at GBP11,068.
Link: myasiaprivatebank.blogspot.sg/2017/05/aviva-4375-12sep2049-gbp11068-profit.html

HSBC 5.625% PERPETUAL: USD16,813 PROFIT:
- On 29 Nov 2016 we had call to buy HSBC 5.625% Perpetual at 96.50.
- One analyst wrote a report predicts that Deutsche Bank will not pay coupon for their coco bonds. This has pushed all coco bonds down sharply, include HSBC coco bonds.
- Today this bond is trading at 102.00. Profit is at USD16,813.
Link: myasiaprivatebank.blogspot.sg/2017/05/hsbc-5625-perpetual-usd16813-profit.html

PRUDENTIAL 5% 20JUL2055: GBP11,012 PROFIT:
-On 30 Oct 2016 we had call to buy Prudential 5% 20 July 2055 at 99.00.
- Political unstability in UK had pushed GBP bond price down.
- Price of the bond is at 102.75. Profit less loan interest is at GBP11,012.
Link: myasiaprivatebank.blogspot.sg/2017/04/prudential-gbp-bond-gbp11012-profit.html


If you had participated in all the 5 trades based on 200k face value in each bond trades, your potential profits will be USD58,507 or SGD81,909.