Fixed interest – Bobs Birdhouse http://bobsbirdhouse.com/ Tue, 22 Nov 2022 16:48:33 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://bobsbirdhouse.com/wp-content/uploads/2021/06/cropped-icon-32x32.png Fixed interest – Bobs Birdhouse http://bobsbirdhouse.com/ 32 32 Yield Duration Opportunity in Emerging Markets Bonds https://bobsbirdhouse.com/yield-duration-opportunity-in-emerging-markets-bonds/ Tue, 22 Nov 2022 16:22:00 +0000 https://bobsbirdhouse.com/yield-duration-opportunity-in-emerging-markets-bonds/ Ildo Frazao Compared to US and other developed market bonds, emerging market bonds offer not only significantly higher nominal and real yields on average, but also shorter durations. Central bank interest rate hikes in emerging and developed markets have led to to higher bond yields across the board, providing investors with significantly higher levels of […]]]>

Ildo Frazao

Compared to US and other developed market bonds, emerging market bonds offer not only significantly higher nominal and real yields on average, but also shorter durations.

Central bank interest rate hikes in emerging and developed markets have led to to higher bond yields across the board, providing investors with significantly higher levels of carry relative to the start of the year. Compared to US and other developed market bonds, emerging market bonds offer not only significantly higher nominal and real yields on average, but also shorter durations. As shown in the chart below, the yield per unit duration ratio of EM bonds is particularly attractive relative to other asset classes among high yield corporates and local currency sovereigns.

Yield-duration profile

Yield-duration profile

Source: VanEck, ICE Data Indices, LLC., JP Morgan Index Research, as of 10/31/2022. EM USD HY Corp is represented by the ICE BofA Diversified HY US Emerging Markets Corporate Plus Index. EM USD Sov is represented by the JP Morgan EMBI Global Diversified Index. US HY is represented by the ICE BofA US High Yield Index. EM Local Sov is represented by the JP Morgan GBIEM Global Core Index. US AGG is represented by the ICE BofA US Broad Market Index. Global AGG is represented by the ICE BofA Global Broad Market Index. Yield per duration is expressed as worst-case yield divided by effective duration.

As of October 31, 2022, emerging market USD high yield corporate bonds offered the highest yield among the asset classes featured, at 13.15% or 375 basis points more than USD sovereign bonds emerging markets and 410 basis points higher than US high yield corporate bonds. Emerging market local currency sovereign bonds provided a return of 8.36%, which is remarkable given that the asset class is, on average, investment grade rated.

Inflation remains consistently high and the Federal Reserve has signaled that while it may begin to ease the pace, it is not done with rate hikes yet. In this environment, emerging bonds may be particularly attractive relative to US and global bonds as a source of income. Emerging market USD high yield corporate bonds currently offer the highest yield per unit of duration, significantly higher than US HY bonds due to both higher yield and shorter duration. This additional “carry” would allow HY firms in emerging markets to absorb a greater share of higher base rates or wider credit spreads. Emerging market local currency sovereign bonds also offer an attractive yield per duration, with the added benefit of diversification as these bonds are less directly affected by fluctuations in US interest rates.

Important Disclosures

Index definitions

ICE BofA Global Broad Market Index tracks the performance of publicly issued investment grade debt securities in major national and Eurobond markets, including sovereign, quasi-government, corporate, securitized and guaranteed securities.

ICE BofA Diversified High Yield US Emerging Markets Corporate Plus Index: is comprised of US dollar-denominated bonds issued by non-sovereign emerging market issuers rated below investment grade and issued in major domestic and Eurobond markets.

ICE BofA US High Yield Index: is composed of lower quality corporate bonds (based on an average of Moody’s, S&P and Fitch) denominated in US dollars. The country of risk of eligible issuers must be an FX-G10 member, a Western European country, a territory of the United States or a Western European country.

ICE BofA US Broad Market Index tracks the performance of publicly issued US dollar-denominated investment-grade debt securities in the US domestic market, including US treasury bills, quasi-government securities, corporate securities, securitized securities, and collateralized securities.

JP Morgan EMBI Global Diversified Index: is comprised of US dollar-denominated Brady bonds, Eurobonds and traded loans issued by sovereign and quasi-sovereign entities in emerging markets. The index’s weighting methodology limits the weighting of countries with larger debt stocks.

JP Morgan GBI-EM Global Core Index (GBIEMCOR): tracks emerging market government debt denominated in local currency. The index weighting methodology limits the weighting of countries with large debt stocks, with a maximum of 10% and a minimum of 1% to 3% depending on the country’s eligible debt stock.

Please note that VanEck may offer investment products that invest in the asset class(es) or industries included in this blog.

This is not an offer to buy or sell, or a solicitation of an offer to buy or sell, any of the securities mentioned herein. The information presented does not imply the provision of personalized investment, financial, legal or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results. Information provided by third party sources is believed to be reliable and has not been independently verified as to its accuracy or completeness and cannot be guaranteed. All opinions, projections, forecasts and forward-looking statements made herein speak as of the date of this communication and are subject to change without notice. The information contained herein represents the opinion of the author(s), but not necessarily that of VanEck.

Duration measures a bond’s sensitivity to changes in interest rates which reflects the change in price of a bond given a change in yield. This duration measure is appropriate for bonds with embedded options. Quantitative easing by a central bank increases the money supply engaged in open market operations with the aim of promoting increased lending and liquidity. Monetary easing is an economic tool used by a central bank to reduce interest rates and increase the money supply in an effort to stimulate economic activity. Correlation is a statistical measure of how two variables change with respect to each other. The illusion of liquidity refers to the effect that an independent variable might have on the liquidity of a security, as this variable fluctuates over time. An issue Holdouts in the fixed income asset class occurs when a country or bond-issuing entity is in default or on the verge of default and initiates an exchange offer with the aim of restructuring its debt held by existing bondholder investors. Carry is the benefit or cost of owning an asset.

Any investment is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that the investment objectives will be achieved and investors may lose money. Diversification does not guarantee a profit or protect against loss in a declining market. Past performance is no guarantee of future performance.

© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.

Original post

Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.

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Bullard sets tone with Fed officials signaling hikes will continue https://bobsbirdhouse.com/bullard-sets-tone-with-fed-officials-signaling-hikes-will-continue/ Thu, 17 Nov 2022 20:30:07 +0000 https://bobsbirdhouse.com/bullard-sets-tone-with-fed-officials-signaling-hikes-will-continue/ (Bloomberg) – St. Louis Fed President James Bullard said policymakers should raise interest rates by at least 5% to 5.25%, hitting financial markets as investors recalibrate the bets on how senior officials would go. Bloomberg’s Most Read “In the past, I’ve said 4.75% to 5%,” he told reporters Thursday after giving a speech in Louisville, […]]]>

(Bloomberg) – St. Louis Fed President James Bullard said policymakers should raise interest rates by at least 5% to 5.25%, hitting financial markets as investors recalibrate the bets on how senior officials would go.

Bloomberg’s Most Read

“In the past, I’ve said 4.75% to 5%,” he told reporters Thursday after giving a speech in Louisville, Kentucky. “Based on this analysis today, I would say 5% to 5.25%. It is a minimum level. According to this analysis, that would at least put us in the zone.

Chairman Jerome Powell said earlier this month that rates will have to rise more than expected due to disappointing inflation data, while suggesting officials could moderate the scale of their increases going forward. A key reading on consumer prices since then has been better than expected, but policymakers continue to stress the need to keep raising rates.

In September, officials had forecast rates to rise to around 4.6% next year, from a current target range of 3.75% to 4%. These projections will be updated at the Fed’s December 13-14 meeting.

Yields on the 10-year US Treasury rose after Bullard became the latest official to say interest rates needed to rise further to curb the highest inflation in 40 years.

San Francisco Fed President Mary Daly said Wednesday that “somewhere between 4.75 and 5.25 seems a reasonable place to consider” for the level at which officials should raise rates and then suspend them.

Bullard’s hawkish tone was echoed later Thursday by Minneapolis Fed Chairman Neel Kashkari, who said it was an “open question” how far the central bank should go with rates to bring demand back into balance.

“I need to be confident that inflation has at least stopped rising, that we’re not falling further behind the curve before advocating for a halt to further advancement of future rate hikes, so we’re not there yet. “, he told the House of Minnesota. of Commerce’s 2022 Economic Summit.

“The Fed is still maintaining an outward appearance of hawkishness as we await another month of inflation data,” said Guy LeBas, chief fixed income strategist for Janney Montgomery Scott LLC in Philadelphia. “A month of falling inflation does not mean the war is over.”

Last week’s data showed consumer inflation rose 7.7% less than expected in the 12 months to October. The November reading will be released on December 13, before officials begin their two days of policy deliberations.

During his presentation, Bullard showed charts indicating that rates will need to be between around 5% and 7% to achieve policymakers’ goal of being “tightly enough” to curb inflation near a peak. four decades.

The calculation used different versions of a Taylor Rule, a popular monetary policy guideline developed by John Taylor of Stanford University.

“Minimum” level

“It’s easy to argue that before this is all over you should move to much higher levels of the policy rate” than 5.25%, said Bullard, who is voting on the policy this year. “But for now, I would be happy to reach the minimum level and that’s why I think the committee is going to have to do more.”

The St. Louis Fed chief, who has been among the most hawkish policymakers this year, was the latest central banker to call for additional action.

The Fed raised rates by 75 basis points on Nov. 2 for the fourth straight time in its most aggressive tightening since the 1980s to rein in inflation that began in the wake of disruptions from the Covid-19 pandemic. 19.

Bullard did not say whether he would favor a 50 or 75 basis point move at the Fed’s December meeting, telling reporters he would look to Powell to set the direction.

A number of his colleagues have called for a downward revision to the size of the next rate hike after last week’s consumer price report showed a slowdown in underlying inflation. consumer goods in October.

Investors expect the Fed to hike rates by half a percentage point next month and for rates to peak at around 5% next year.

The St. Louis Fed chairman said he expects officials to keep rates high for an extended period to avoid the kind of monetary policy mistakes of the 1970s that led to inflation constantly high.

“We definitely don’t want to replay this episode,” he told reporters. “So we’re going to have to see very hard evidence that inflation is falling significantly towards target, and I think we’re going to want to err on the side of staying higher longer for that to happen.”

Bullard said while he expected inflation to fall next year, there has been relatively little evidence of that so far.

“So far, the change in monetary policy stance appears to have had only limited effects on observed inflation, but market prices suggest that disinflation is expected in 2023,” Bullard said in his prepared remarks, adding that the rate hikes so far have caused little financial trouble. stress.

(Updates with Kashkari’s comment in seventh paragraph.)

Bloomberg Businessweek’s Most Read

©2022 Bloomberg LP

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Inflation Relief Checks Live Online: Social Security Payments, Inflation Expectations, Housing Market https://bobsbirdhouse.com/inflation-relief-checks-live-online-social-security-payments-inflation-expectations-housing-market/ Mon, 14 Nov 2022 20:22:35 +0000 https://bobsbirdhouse.com/inflation-relief-checks-live-online-social-security-payments-inflation-expectations-housing-market/ Fed’s Cautious Tone on Inflation Sends Futures Down U.S. stock index futures fell slightly on Monday as hawkish comments from a U.S. Federal Reserve official dampened hopes for a less aggressive pace of monetary policy tightening, Reuters reports. Federal Reserve Governor Christopher Waller said Sunday that markets should now pay attention to the “end point” […]]]>

Fed’s Cautious Tone on Inflation Sends Futures Down

U.S. stock index futures fell slightly on Monday as hawkish comments from a U.S. Federal Reserve official dampened hopes for a less aggressive pace of monetary policy tightening, Reuters reports. Federal Reserve Governor Christopher Waller said Sunday that markets should now pay attention to the “end point” of rate hikes, not the pace of each move, and the end point is probably “a way to go”.

The comments from Waller, a voting member of the rate-setting committee this year, follow weaker-than-expected inflation data for October that led to a euphoric market rally last week, with the S&P 500 recording its biggest weekly percentage gains in about five years. month.

“The message is coming loud and clear from the Fed, investors should holding firm against expectations of monetary policy easing“said Susannah Streeter, principal investment and market analyst at Hargreaves Lansdown.

Traders now expect the Fed to hike interest rates by half a point in December and expect a terminal rate in the range of 4.75% to 5.0% in May 2023 .

As of 5:30 a.m. ET, Dow e-minis were down 82 points, or 0.24%, S&P 500 e-minis were down 14 points, or 0.35%, and Nasdaq 100 e-minis were down 71.5 points, or 0.60%.

Growth stocks returned some gains from last week, with Apple Inc, Intel Corp and Amazon.com down about 1% each in premarket trading.

Tesla Inc fell about 2% as Chief Executive Elon Musk said “I have too much work on my plate” when asked about his recent acquisition of Twitter and his leadership of the electric vehicle maker.

Over the coming week, investors will be watching a series of economic data closely, including retail sales figures on Wednesday.

Chinese leader Xi Jinping and US President Joe Biden met on Monday for long-awaited talks that come as relations between their countries are at a decades-old low, marred by disagreements over a host of issues from Taiwan to trade.

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Types of certificates of deposit https://bobsbirdhouse.com/types-of-certificates-of-deposit/ Fri, 11 Nov 2022 20:10:47 +0000 https://bobsbirdhouse.com/types-of-certificates-of-deposit/ Although the certificate of deposit, or CD, may seem like a generic and simple savings account, this financial tool is more diverse than it seems. CDs can be especially useful when interest rates are on the rise, and there are many benefits to earning a fixed interest rate over time. Balancing the appeal of the […]]]>

Although the certificate of deposit, or CD, may seem like a generic and simple savings account, this financial tool is more diverse than it seems. CDs can be especially useful when interest rates are on the rise, and there are many benefits to earning a fixed interest rate over time. Balancing the appeal of the predictability and security of CDs, however, is a major trade-off: your deposit is locked in for a set period of time, and withdrawing early will subject you to fees.

Depositing money on a CD will generally earn more interest than a savings account – even a high-yield savings account — Where money market account. And there are many types of CDs to choose from. Read on for an overview of them all.

What is a CD?

A CD is a type of savings account that pays a fixed interest rate for a fixed term. The main difference between a CD and a savings or money market account is that you cannot withdraw your money from a CD until it has been in the account for a certain period of time, called a term. . Common terms include three, six, nine and 18 months as well as one, two, three, four and five years.

As a general rule, the longer you leave your money intact on a CD, the more interest you will earn. CDs are FDIC insured for up to $250,000 if withdrawn from a federally insured credit union or bank. CDs have no monthly fee, but most have an early withdrawal penalty.

traditional CD

To open a traditional CD, you make a one-time deposit and then let the funds grow until the CD matures for a specific term at a fixed interest rate. Once the CD matures or reaches the end of the term, you can roll your CD into another term or cash out. One of the main disadvantages of a CD is early withdrawal penalties. If you withdraw your money before it’s due, you can face a hefty penalty that can make any interest earned seem nonexistent.

Callable CD

Some CDs are structured so that the issuer can close the CD before its maturity date. This type of CD is called a callable CD. You generally want to invest in a CD that is non-redeemable because it protects your money from being repossessed by the issuer. But if you invest in a redeemable CD and the bank redeems it before it reaches maturity, you will still receive all of your principal and the interest it has earned to date.

However, you are more likely to have the bank repossess your CD sooner if interest rates suddenly drop. Callable CDs are still rare and can be harder to find than traditional CDs. Callable functionality can only be activated by the sender.

CD IRA

An IRA CD is held in a tax-advantaged Individual Retirement Account to help you save money for retirement. An IRA CD works much like a traditional CD, but there are some notable differences, including the amount you can invest and withdrawal penalties.

When it comes to a traditional CD, you can deposit any amount of money into a CD account, lock it for a pre-determined amount of time, and get a higher return on investment than you would with a CD account. savings or checking account.

However, your IRA CD is a tax-efficient retirement account, which means you can save and invest your money in many different ways. Since an IRA CD is part IRA, you will have the same rules and requirements as other IRA accounts, such as how much you can contribute. People under 50 can contribute up to $6,000 and people over 50 can contribute up to $7,000.

If you try to withdraw money from a traditional CD before it matures, you will inevitably face an early withdrawal penalty. However, if you try to withdraw from your IRA CD early, you will face a penalty from your bank and the IRS.

foreign currency CDs

A foreign currency CD is held in the currency of another country. You may want a foreign currency CD if you think the dollar will fall against other currencies. Or, you may want to invest in other currencies because they are expected to rise against the dollar. With a foreign CD, the money is converted into another currency for the term; the funds earn interest in that currency and the money is converted back into dollars on the due date.

negotiated CD

A traded CD is bought and sold in the secondary market through a brokerage account. These term savings products are similar to traditional CDs, but they are more liquid because they trade like bonds.

Zero-coupon CDs

A zero coupon CD does not make periodic interest payments like a traditional fixed rate CD. Instead, it is sold at a discount to its face value, which equals its value once it reaches maturity. The CD holder receives only the face value of the CD when it matures. These are generally long-term investments, meaning you won’t have access to interest earned before the CD matures.

Giant CD

A giant CD requires a minimum deposit of around $100,000. A $95,000 CD might technically be a “jumbo CD”, but it might not fetch as much as a $105,000 CD. Jumbo CDs — and super jumbo CDs, which require a minimum investment of $250,000 or more — often pay higher interest rates than regular CDs. But in today’s near-zero interest rate environment, jumbo CDs don’t earn significantly higher yields than regular CDs.

extra CDs

A bump-up CD allows the depositor to request an interest rate increase. If CD interest rates increase, the depositor can request that their existing certificate of deposit be “raised” at the new interest rate – as long as the rates offered by the bank for the specific CD also increase. Banks usually allow one increase per term.

Complementary CD

As the name suggests, an add-on CD helps to add money to the account balance after the initial deposit. Money is deposited at the start of the term, then additional deposits are allowed throughout the term. The interest rate remains the same even when money is added, and there are no monthly fees, but there is usually an early withdrawal penalty when money is withdrawn.

progress cd

With a step-up CD, you can lock in an interest rate for a set number of months, but a pre-set rate increase will occur automatically on scheduled dates. Like other CD accounts, there are no monthly fees, but early withdrawals are subject to a penalty.

Liquid CDs

A liquid CD does not charge penalties for early withdrawals, making it more of a savings account than a standard CD. Similar to a hybrid CD/savings account combination, you can withdraw funds from a liquid CD at any time by contacting the bank, credit union, or other financial institution where you purchased the CD. . But this privilege can come at a cost. Liquid CDs generally pay a lower interest rate than other types of CDs because they allow penalty-free access to funds.

First, you can usually only make one withdrawal without penalty. After that, you will likely face the same early withdrawal penalty as with a traditional CD. Second, some sellers place a limit on how much you can withdraw from a liquid CD at one time – before the penalties kick in, so always make sure you read the fine print.

high performance CDs

A high-yield CD, also called a high-interest CD or high-yield CD, is a type of CD that can pay a higher interest rate than a standard savings account. But the amount of interest you earn varies over time because interest rates fluctuate, unlike a fixed rate CD. High-yield CDs are usually found at online banks and credit unions, which may offer you slightly higher yields to earn your business.

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PHK CEF: High yield bond fund adapted to the current situation https://bobsbirdhouse.com/phk-cef-high-yield-bond-fund-adapted-to-the-current-situation/ Sun, 06 Nov 2022 11:41:56 +0000 https://bobsbirdhouse.com/phk-cef-high-yield-bond-fund-adapted-to-the-current-situation/ piranka ~ By Snehasish Chaudhuri, MBA (Finance) The PIMCO High Income Fund (New York stock market :PHK) is a closed-end fixed-income mutual fund (CEF) that invests in public bond markets around the world. This sales his wallet with high yield, low rated corporate bonds and highly secured low yield government bonds. This US-based fund was […]]]>

piranka

~ By Snehasish Chaudhuri, MBA (Finance)

The PIMCO High Income Fund (New York stock market :PHK) is a closed-end fixed-income mutual fund (CEF) that invests in public bond markets around the world. This sales his wallet with high yield, low rated corporate bonds and highly secured low yield government bonds. This US-based fund was established on April 30, 2003, and for nearly 20 years has paid out monthly dividends. The annual average yield over the last 10 years varied mainly between 11 and 14%, and for the year 2022 the return amounts to 10.7%.

However, the monthly payment was gradually reduced from $0.1219 in 2003 to $0.048 currently. As the yield remained within this range, it means that the market price of PHK gradually declined. PHK’s stock has rallied after the price shocks it suffered during the global financial crisis and the covid-19 pandemic. But, otherwise, the market price has been gradually declining. So, it is perhaps not shocking for PHK investors to see a price loss of 25% over the past year, while the market itself has suffered tremendously.

PHK is a well-diversified and well-managed fixed income fund

PIMCO High Income Fund was launched and is managed by Allianz Global Investors Fund Management LLC. The fund is co-managed by a subsidiary of Allianz SE (OTCPK: ALIZF), named Pacific Investment Management Company LLC. (PIMCO). PIMCO is an American investment manager that manages over $2.2 trillion in assets through various fixed income funds. In addition to PHK, PIMCO also manages the PIMCO Corporate & Income Opportunity Fund (PTY). PHK employs a dynamic asset allocation strategy across multiple fixed income sectors, which may include corporate debt, government and sovereign debt, mortgages and other asset-backed securities, taxable municipal bonds, etc. .

The PIMCO High Income Fund compares to the ICE BofA US High Yield Total Return Index. This index is comprised of US dollar-denominated corporate debt securities rated below investment grade, ie, rated below BBB. The fixed income securities that make it up also have a residual maturity greater than 1 year, a minimum amount outstanding of $100 million and a fixed coupon schedule.

The average duration of PHK’s portfolio is 6.8. Duration is the measured percentage change in the price of a bond in response to a 1% change in the bond’s yield. The fund earns a weighted average coupon of 5.94% on its assets and has a high expense ratio of 1.18%. The asset quality of its corporate bond portfolio is relatively poor, with only 4% of the entire fund invested in securities rated BBB and above. Thus, the fund has a higher degree of credit risk or default risk. However, my biggest concern with this fund is the possible negative impact of the economic downturn.

Impact of monetary tightening on a bond portfolio

Oil prices have soared and global supply chains and logistics networks have deteriorated due to the ongoing conflict between Russia and Ukraine. Higher energy prices have led to higher input costs for most manufactured goods and hence high inflation. On the other hand, the supply chain crisis has increased the costs of the majority of consumable products. The inflation rate is expected to remain high over the next few months, although the US Federal Reserve (Fed) has tightened its monetary policy. During this year, the Fed raised the interest rate four times, totaling 2.75%.

However, although the fund offers the same yield, as interest rates rise, investors’ real income declines. This could be a likely reason why the price of this ETF has gradually declined, although it should theoretically rise in the current rising interest rate environment. The price may drop even further in the short term. However, this week the Fed hinted at smaller hikes than before [see here also] in the coming months, which, if it happens, could work well for investors in this fund. Economists have warned that further monetary tightening could push the economy into recession.

Investors looking to build a portfolio of monthly income streams can greatly benefit from an investment in the PIMCO High Income Fund. This fund managed to balance its portfolio. 33% of its assets are invested in government bonds. An equal proportion of its portfolio is invested in corporate bonds, municipal bonds, mortgage-backed securities and derivatives. Bond prices tend to fall when interest rates rise because the real income of bond investors declines. And as bond prices fall, investors tend to receive higher yields. So investors who buy when the price is low (as it is now) will likely be able to enjoy a higher return on their investment.

Investment thesis

Rising energy prices, supply-side shortages, rising property prices and the resulting inflation did not have a positive impact on the market. As the market has become very uncertain and the risks of economic recession persist, investing in fixed income securities becomes a wise option. This is because common stock dividends become highly uncertain, but bond coupon income remains almost certain. PIMCO High Income Fund is a fixed income CEF that has consistently generated exceptionally high returns and is less likely to experience a distribution cut because its investments always generate the same coupon. However, over the past 20 years, the fund has suffered a gradual price loss and is currently trading below $5.

Its corporate bond portfolio has a low credit rating, mostly lower quality, and is therefore vulnerable during a time when investors fear a recession. However, if the Federal Reserve does not opt ​​for further monetary tightening, investors have much less reason to worry. Additionally, this fund made the right decision by balancing its portfolio with high yield, low rated corporate bonds and highly secured low yield government bonds. Likely due to these factors, the fund is currently selling at a marginal premium to its net asset value (NAV). At a time when the broader market is shrouded in pessimism, the PIMCO High Income Fund certainly stands out, especially with its balanced portfolio and consistent double-digit return.

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A brief history of the mortgage, from its roots in ancient Rome to the English “mortgage” and its revival in America https://bobsbirdhouse.com/a-brief-history-of-the-mortgage-from-its-roots-in-ancient-rome-to-the-english-mortgage-and-its-revival-in-america/ Thu, 03 Nov 2022 12:00:53 +0000 https://bobsbirdhouse.com/a-brief-history-of-the-mortgage-from-its-roots-in-ancient-rome-to-the-english-mortgage-and-its-revival-in-america/ The average interest rate for a new US The 30-year fixed-rate mortgage exceeded 7% at the end of October 2022 for the first time in over two decades. This is a sharp increase from the previous year, when lenders were charging homebuyers just 3.09% for the same type of loan. Several factors, including inflation rates […]]]>

The average interest rate for a new US The 30-year fixed-rate mortgage exceeded 7% at the end of October 2022 for the first time in over two decades. This is a sharp increase from the previous year, when lenders were charging homebuyers just 3.09% for the same type of loan.

Several factors, including inflation rates and the general economic outlook, affect mortgage rates. One of the main drivers of the ongoing upward spiral is the Series of Federal Reserve interest rate hikes intended to control inflation. Its decision to increase the reference rate by 0.75 percentage points on November 2, 2022up to 4% will push the cost of mortgages even higher.

Even if you’ve had mortgage debt for years, you may not know the history of those loans – a topic I cover in my mortgage finance course for undergraduate business students at Mississippi State University.

The term dates back to medieval england. But the roots of these legal contracts, in which land is pledged for a debt and will become the property of the lender if the loan is not repaid, go back thousands of years.

ancient roots

Historians trace origins of mortgage contracts to the reign of King Artaxerxes of Persia, who ruled modern Iran in the 5th century BC. The Roman Empire formalized and documented the legal process of pledging a loan.

Often using the forum and temples as base of operations, mensariiwhich is derived from the word mensa or “bank” in Latin, would arrange loans and charge interests of borrowers. These government-appointed public bankers required the borrower to provide collateral, whether real estate or personal property, and their agreement to the use of collateral would be handled in three ways.

First the Trust, Latin for “trust” or “confidence”, required the transfer of ownership and possession to the lenders until the debt was paid in full. Ironically, this arrangement did not imply any trust.

Second, the pignusLatin for “pawn”, allowed borrowers to retain ownership while sacrifice possession and use until they repay their debts.

Finally, the MortgageLatin for “pledge”, allows borrowers to retain both property and possession while paying off their debts.

The commitment of the living against the dead

Emperor Claudius introduced Roman law and customs to Britain in AD 43. four centuries of Roman domination and the the next 600 years known as the Dark Agesthe British adopted another Latin term for a pledge of security or guarantee for loans: Vadium.

If pledged as security for a loan, real estate could be offered as “Vivum vadium.” The literal translation of this term is “living commitment”. The land would be temporarily pledged to the lender who used it to generate income to repay the debt. Once the lender collected enough revenue to cover the debt and some interest, the land reverted to the borrower.

With the alternative, the “Mortuum Vadiumor “mortgage”, the land was pledged to the lender until the borrower could repay the debt in full. It was essentially an interest-only loan with full principal payment by the borrower required at a later date. When the lender demanded repayment, the borrower had to repay the loan or lose the land.

Lenders would keep the proceeds of the land, whether it was income from farming, selling timber, or renting the property for housing. Indeed, the earth was death to the debtor during the life of the loan because it brought no benefit to the borrower.

Next Victory of William the Conqueror at the Battle of Hastings in 1066, the English language was strongly influenced by Norman French – The language of Guillaume.

This is how the Latin term “Mortuum Vadium” turned into “Mortgage», Norman French for “death” and “gage”. “Mortgage,” a mix of two wordsthen entered the English vocabulary.

Establishment of borrower rights

Unlike today’s mortgages, which are usually due within 15 or 30 years, English loans of the 11th-16th centuries were unpredictable. Lenders could demand repayment at any time. If the borrowers could not comply, the lenders could seek a court order and the land would be forfeited by the borrower to the lender.

Disgruntled borrowers could petition the king about their plight. He could refer the matter to the Lord Chancellor, who could govern as he sees fit.

Mr Francis BaconLord Chancellor of England from 1618 to 1621, established the Right of fair redemption.

This new right allowed borrowers to repay their debts, even after default.

The official end of the period to redeem the property has been called foreclosurewhich is derived from an Old French word meaning “exclude.” Today, foreclosure is a legal process in which lenders take possession of property used as collateral for a loan.

Early history of housing in the United States

The English colonization of what is now United States did not immediately transplant mortgages across the pond.

But eventually, American financial institutions offered mortgages.

Before 1930 they were small – generally amounting to a maximum of half the market value of a dwelling.

These loans were generally short-term, maturing in less than 10 years, with repayments due only twice a year. Borrowers either paid nothing of the principal or made a few such payments before the due date.

Borrowers would have to refinance loans if they couldn’t repay them.

Mortgages make it easier for Americans to buy homes like these in Huntington Beach, California.
Jeff Gritchen/MediaNews Group/Orange County Registry via Getty Images

Save the housing market

Once America fell into the Great Depressionthe the banking system has collapsed.

Since most homeowners are unable to repay or refinance their mortgage, the the housing market has collapsed. Number of seizures increased to over 1,000 a day in 1933and house prices fell sharply.

The federal government responded by establishing new agencies to stabilize the housing market.

They understood the Federal Housing Administration. He offers mortgage insurance – borrowers pay a small fee to protect lenders in the event of default.

Another new agency, the home owner loan companyestablished in 1933, purchased short-term, semi-annual, interest-only mortgages and turned them into new long-term loans with 15-year terms.

Payments were monthly and self-amortized – covering both principal and interest. They were also fixed rate, remaining stable for the duration of the mortgage. Initially they were more interest oriented and later they disbursed more principal. The company made new loans for three years, handling them until it closed in 1951. He pioneered long-term mortgages in the United States

In 1938, Congress established the Federal National Mortgage Association, better known as the Fannie Mae. This government-sponsored company made long-term fixed rate mortgages viable through a process called securitization – sell debt to investors and use the proceeds to purchase these long-term mortgages from banks. This process reduced risk for banks and encouraged long-term mortgage lending.

Fixed-rate or adjustable-rate mortgages

After World War II, Congress authorized the Federal Housing Administration to insure 30-year loans on new construction and, a few years later, purchases of existing homes. But then the 1966 credit crisis and the years of high inflation that followed made adjustable rate mortgages more popular.

Known as ARMs, these mortgages have stable rates for only a few years. Typically, the initial rate is significantly lower than it would be for 15 or 30 year fixed rate mortgages. Once this initial period is over, ARM interest rates be adjusted up or down each year – as well as monthly payments to lenders.

Unlike the rest of the world, where MRAs predominate, Americans still prefer the 30-year fixed rate mortgage.

About 61% of US owners have mortgages today – with fixed rates the dominant type.

But as interest rates rise, demand for ARM grows Again. If the Federal Reserve fails to curb inflation and interest rates continue to climb, unfortunately for some ARM borrowers, the term “death pledge” may live up to its name.

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Homes for sale with 2% fixed rate mortgage: new offers from Mulgrave Properties in Yorkshire https://bobsbirdhouse.com/homes-for-sale-with-2-fixed-rate-mortgage-new-offers-from-mulgrave-properties-in-yorkshire/ Tue, 01 Nov 2022 00:01:00 +0000 https://bobsbirdhouse.com/homes-for-sale-with-2-fixed-rate-mortgage-new-offers-from-mulgrave-properties-in-yorkshire/ All this, and green energy performance too Church Farm in Tockwith has a selection of remaining three and four bedroom properties, due for completion in early 2023. Amid rising mortgage rates and energy costs, homebuilder Mulgrave Properties has put in place a host of incentives to impress potential buyers. Not only do you buy chain-free […]]]>
All this, and green energy performance too

Church Farm in Tockwith has a selection of remaining three and four bedroom properties, due for completion in early 2023.

Amid rising mortgage rates and energy costs, homebuilder Mulgrave Properties has put in place a host of incentives to impress potential buyers.

Not only do you buy chain-free when moving to new construction, they have also introduced a 2% mortgage freeze* on select properties. In addition to 0% stamp duty payable for first time buyers and part exchange opportunities.

Attractive fixed rate offers and no chain!!

Book by November 28 and lock your mortgage interest rate at 2% for 2 years on selected homes based on church farm in Tockwith, where the few remaining three- and four-bed properties are due for completion in early 2023.

Are you worried about rising energy prices? Mulgrave’s green energy property performance includes the installation of highly efficient heating systems, full insulation and double glazing throughout, giving you one less thing to worry about when turning down the thermostat in your warm new home and comfortable.

The Mulgrave Mortgage Freeze* is based on Barclays Bank’s current 2-year 75% LTV fixed rate mortgage at 5.5% principal and interest over a 30-year repayment term. A subsidy calculation will then be based on the same product, but at an interest rate reduced to 2%.

New homes in Tockwith with low fixed rate mortgages and green energy performance too

The difference between these rates will be paid at the end of the project to the bank account designated by the buyer in 24 equal monthly installments. You can read more about how this offer works and the total savings mulgraveproperties.co.uk

Tockwith homes eligible for Mulgrave’s 2% (and higher) mortgage freeze are:

2% fixed rate mortgage and no chain – Yorkshire homebuilder unveils offers in Tockwith

Fabulous four bedroom show home fitted with fixtures and appliances and including all flooring, curtains, blinds and light fixtures. The interiors have been decorated by The Design House, York and there is the option to buy fully furnished, so that everything is ready and moved in the day.

A three bedroom house ideal for those seeking refuge from the second hand housing market and there is 0% stamp duty payable for first time buyers. The open nature of the kitchen and dining area is perfect for entertaining, and the separate living room is made for moments of solitude.

The first floor has an en-suite master bedroom, two additional bedrooms and a bathroom.

There is also a single garage and off-street parking.

Ten miles from York and six miles from Wetherby, Church Farm is perfect for first time buyers, professionals or those wishing to minimize both maintenance and long term expenses on a brand new property.

Visits by appointment only from Thursday to Monday from 10:30 a.m. to 5 p.m. Call 0333 370 2507 or online booking

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Last week I got half of my home loan serviced. Here are the tricks you need to know https://bobsbirdhouse.com/last-week-i-got-half-of-my-home-loan-serviced-here-are-the-tricks-you-need-to-know/ Fri, 28 Oct 2022 18:05:00 +0000 https://bobsbirdhouse.com/last-week-i-got-half-of-my-home-loan-serviced-here-are-the-tricks-you-need-to-know/ Correction of fact 1: You can only attach a clearing account to a variable loan. Loading Well, you might be able to snag one at a fixed portion, but the “win” rate will be pitiful. You can only save half the interest on the money you hold. Full and quality compensation will give you a […]]]>

Correction of fact 1: You can only attach a clearing account to a variable loan.

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Well, you might be able to snag one at a fixed portion, but the “win” rate will be pitiful. You can only save half the interest on the money you hold.

Full and quality compensation will give you a dollar-for-dollar reduction in your loan balance and save you 100% interest on that amount. Offsets are important and powerful debt reduction tools if structured properly.

All of the borrowers savings should be held there, including your salary. And if you’re disciplined, consider putting your spending on a credit card with a long, interest-free period so you can sit your bills on it and save extra interest all month — for free.

And that’s a big part of why I always advocate a variable portion of a loan.

Fix Fact 2: You will lose any overpayments you made directly on a loan.

Few people realize that a major change like fixing your loan will likely cause your balance to be recalculated and suck up any amount by which you are ahead of that balance.

As inflation rises, economists expect further interest rate hikes.Credit:Bloomberg

If you’ve just parked money in your loan for a later date – or if it’s savings as above – it will “go away” with the hold. Or at least be locked at the top forever more.

If you need to maintain access to your money — and you always need to keep emergency funds set aside — you need to withdraw it first. Note that while you can make additional (limited) repayments once a hotfix begins, most lenders won’t allow you to redraw them either.

Indeed, it would be better if you never counted on a re-draw – lenders can and have refused withdrawals even on variable loans. Making additional repayments to a separate clearing account is a much safer and more flexible strategy.

Correction of fact 3: The “ERA” will cost you dearly if you sell your home or terminate your loan early.

Prepayment Adjustment (ERA) will apply if you attempt to break the contract. It’s because you’ve made a commitment to stay – and to pay.

The calculation compensates the bank for the revenue it would lose and could run into the tens of thousands of dollars if the variable rates went way below what you set. You must settle your bad bet.

For all the reasons above, it’s a great decision to throw a fix into the mix.

But with another rate hike – and possibly even a double – now widely expected on Tuesday, could you be saved?

  • The advice given in this article is of a general nature and is not intended to influence readers’ decisions regarding investments or financial products. Before making financial decisions, they should always seek their own professional advice that takes into account their personal circumstances.

Nicole Pedersen-McKinnon is the author of How to Get a Free Mortgage Like Me. Follow Nicole on Facebook, Twitter Where instagram.

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open to close, stocks, data, earnings and news https://bobsbirdhouse.com/open-to-close-stocks-data-earnings-and-news/ Wed, 26 Oct 2022 12:34:00 +0000 https://bobsbirdhouse.com/open-to-close-stocks-data-earnings-and-news/ European markets were choppy on Wednesday, with corporate earnings season in full swing and a European Central Bank meeting ahead. The pan-European Stoxx 600 was down 0.4% by mid-afternoon, after bouncing either side of the flatline throughout the trading session. Tech stocks fell 1.9% while retail stocks gained 1%. The European blue chip index ended […]]]>

European markets were choppy on Wednesday, with corporate earnings season in full swing and a European Central Bank meeting ahead.

The pan-European Stoxx 600 was down 0.4% by mid-afternoon, after bouncing either side of the flatline throughout the trading session. Tech stocks fell 1.9% while retail stocks gained 1%.

The European blue chip index ended Tuesday’s session up 1.4%, hitting its highest level since Sept. 19.

Corporate earnings are a key driver of stock price developments in Europe. German Bank, Barclays, Standard charter, Mercedes Benz, Heineken and Reckitt Benckiser all reported before the bell on Wednesday.

Investors are also looking forward to Thursday’s European Central Bank meeting, when it is widely expected to hike rates by 75 basis points; and for clues on its trajectory towards quantitative tightening, as the EU heads into a likely recession.

US stocks rallied for a third straight day on Tuesday as soft economic data indicated the Fed might not need to be as aggressive with rate hikes, although stock futures were lower Wednesday morning after Alphabet earnings disappointed.

A slew of U.S. companies will report on Wednesday, including Meta, Coca Cola and McDonalds, and data is expected on weekly mortgage applications, wholesale inventories and new home sales.

Asia-Pacific markets were upper on the Fed’s expectations and comments from the China Securities Regulatory Commission on creating a “regulated, transparent, open, vibrant and resilient” market.

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Coca-Cola Europacific Partners is trading at a yield of 7.4% FCF (NASDAQ:CCEP) https://bobsbirdhouse.com/coca-cola-europacific-partners-is-trading-at-a-yield-of-7-4-fcf-nasdaqccep/ Sat, 22 Oct 2022 15:35:00 +0000 https://bobsbirdhouse.com/coca-cola-europacific-partners-is-trading-at-a-yield-of-7-4-fcf-nasdaqccep/ Jeff Schear/Getty Images Entertainment Introduction Coca-Cola Europacific Partners (NASDAQ:CPEC) was one of my favorite Coca-Cola bottlers because this company has a monopoly on the production, marketing and distribution of Coca-Cola (New York stock market :KO) products for several regions with high GDP per capita (Western Europe, two of the three Scandinavian countries – except Denmark […]]]>

Jeff Schear/Getty Images Entertainment

Introduction

Coca-Cola Europacific Partners (NASDAQ:CPEC) was one of my favorite Coca-Cola bottlers because this company has a monopoly on the production, marketing and distribution of Coca-Cola (New York stock market :KO) products for several regions with high GDP per capita (Western Europe, two of the three Scandinavian countries – except Denmark – and Australia and New Zealand. While CCEP originally focused only on European countries, the acquisition of Coca -Cola Amatil in 2021 expanded its footprint, which added the last two countries.

Chart
Data by Y-Charts

CCEP has a very liquid listing in the United States and the Netherlands where it also trades with CCEP as a stock symbol on Euronext Amsterdam. As CCEP reports its financial results in euros, I will use the euro as my base currency throughout this article and refer to the company’s shares listed in Amsterdam where the average daily volume is nearly 30,000 shares per day. If you are looking for cash, the US is vastly superior as the average daily volume in the US amounts to approximately 1.4 million actions per day. There are currently approximately 457 million shares outstanding, giving a market capitalization of €21.7 billion.

For a better understanding of the business model, I would like to refer you to an older article as this article is intended as an update of previous coverage.

Good results in the first half

The first quarter is usually the weakest, but Coca-Cola Europacific Partners was still able to report sales of almost 8.3 billion euros, which led to a gross profit of 2.99 billion euros. This is an excellent result because the gross margin increased by around 44% while the turnover increased by “only” 40%. Other operating expenses also increased at a rate of less than 40%, and this is why the operating result amounted to EUR 967m, an increase of almost 86% compared to the first half of the year. ‘last year. Although this is the first year that the Amatil acquisition has contributed to a full fiscal year, it was the margin expansion that captured my interest.

income statement

CCEP Investor Relations

The acquisition of Amatil was fully paid in cash and this had a negative impact on the gross debt level, the net debt level and of course also on the interest charges. Despite this, the pre-tax result almost doubled and the net result shows a net result of 675 million euros, of which 667 million euros are attributable to the ordinary shareholders of CCCEP. This represents an EPS of EUR 1.46 per share as the number of shares barely changed (amounting to 457 million shares).

All of my previous articles have focused on CCEP’s cash flow performance to try to determine how attractive the company is, and it makes sense to take a closer look at the first half cash flow statement as well.

Reported operating cash flow was €1.65 billion, but this included a contribution of €456 million (compared to just €101 million in the first half of 2021). Thus, excluding changes in working capital, CCEP’s operating cash flow increased to €1.2 billion from €1.01 billion. From the 1.2 billion euros, it is still necessary to deduct the 80 million euros of rents as well as the 98 million euros of interest payments. Thus, on an adjusted basis, operating cash flow was 1.02 billion euros (compared to 886 million euros in the first half of 2021).

Cash flow statement

CCEP Investor Relations

The total capex was exactly 200 million euros. Higher than the first half of 2021, but that’s normal as CCEP’s asset base has expanded. Adjusted free cash flow in the first half of 2022 (recognition of taxes and income and cash flow attributable to non-controlling interests) was around €755 million, for an FCFPS of €1.66. This is higher than the reported net profit, as the company recorded €386 million in depreciation charges, while the total capital expenditure + lease payments was only €280 million. .

The free cash flow result is roughly in line with the 1.6 billion euros of free cash flow forecasts provided by CCEP. That’s EUR 3.5 per share and essentially means the stock is trading at a free cash flow yield of over 7%.

Recent acquisition of Australasian business will help reduce seasonal impact

As explained in a previous article, 2022 will be the first full year that the Amatil division will contribute to the consolidated results of the Coca-Cola Europacific partners. Although CCEP paid quite a high price for Amatil (greater than 12 times EBITDA synergy benefits as the initial offer was increased to bring the deal across the finish line), the combined entity is still working to realize the potential synergy benefits (although there is no not have many synergies to unlock because there is very little overlap).

The only significant benefit for CCEP is to see how the acquisition of Amatil will mitigate seasonality. In Europe, the summer months are the most important period for the sale of Coca-Cola products and the second and third quarters are traditionally the strongest, with the fourth and first quarters posting rather weak results. The acquisition of Amatil will be useful because the fourth quarter of the calendar year is its seasonal peak, which means that only the first quarter remains as a “weak” quarter in all divisions.

CCEP is continuing its 50% dividend policy, which means that based on the consensus estimate of EUR 3.30 EPS for this year, the dividend will be EUR 1.65 per share. As Free Cash Flow of EUR 3.50 will be higher than reported EPS, CCEP will retain approximately EUR 845 million of Free Cash Flow on its balance sheet, which will help reduce net debt, which will mitigate the impact of rising interest rates. on the market.

Balance sheet liabilities

CCEP Investor Relations

The balance sheet currently contains 2.05 billion euros in cash and short-term investments but around 12.6 billion euros in gross debt for a net debt level of around 10.5 billion euros. So while keeping 845 million euros in free cash flow seems like a lot of money, it’s actually only 5% of the net debt level. Fortunately, CCEP’s debt is mostly fixed rate bonds and the maturities are very well distributed. This means that the company could probably simply repay the bonds when they mature with more than 800 million euros per year of retained annual free cash flow. This also means that CCEP should be very well protected against rising interest rates. Just to give you an idea of ​​how important this is: six-year EUR bonds (the 0.20% bonds maturing in December 2028 shown in the image below) currently have a YTM of around 4.5%.

Debt distribution

CCEP Investor Relations

Investment thesis

Coca-Cola Europacific Partners remains an attractively priced defensive choice. Thanks to the long-standing relationship with Coca-Cola and robust free cash flow, net debt isn’t too much of a concern, and over the next five years CCEP will likely retain around €4.5-5 billion. free cash flow, helping to rapidly reduce net debt.

The commitment to pay out 50% of profits in the form of dividends is also interesting. Not least because consensus estimates use FY2024 EPS of EUR 3.89 per share, which should translate into a dividend of EUR 1.94 per share for a yield of 4.1% based on the current dividend policy. The projected EV/EBITDA ratio using 2023 year-end assumptions (€3.1 billion EBITDA and net debt of €9.5 billion) is only 10, making the title very reasonably priced at this point.

I was hoping the stock price would drop a little more during the recent market turmoil, but it could very well be “waiting for Godot” and I think I could enter a new long position in the next few weeks .

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