General Bond Discussion
It looks like you're new here. If you want to get involved, click one of these buttons!
General Stock Discussion
General Bond Discussion
Bond ETF analysis
Recommendations for 5% yields
General Bond Discussion
Getting very difficult to find yields on short to medium Corp Bonds that I need to generate a yield of just over 5% to hit my 5 year target for my SIPP (I can invest in denominations of 100k for the right bonds)
Any ideas welcome.
All about risk.
How risky do you want to get?
How long is "medium"?
Need to stop taking risks as I'm working towards early retirement at 55 in 5 years time. That said I will be keeping my portfolio invested and drawing down the income and was hoping by then a 5.75 yield would be relatively safe and achievable, not so sure now.
I was watching the Invest 9 5/8%, Old Mutual 8% and Royal London 6.125% for a while but have well missed the boat on those.
I recently sold out of IPF 6.125% at par as I though the risk had increased too much.
I need to invest my SIPP totally in good bonds that will take me out to retirement and take away the opportunity to play the equity markets with the spare cash lol
We are living in a different world to that which existed even only a few years ago and I don't think there are any "risk free" 5 year bonds that yield anything like 5%.
Problem is that you sound as though you're sitting on an awful lot of cash - and that's not growing at all. Soon you may find that banks and even SIPP providers are charging you for holding cash.
Of course I could well be wrong and someone will come along in a minute with suggestions for safe 5% yielding non financial bonds.
I agree with Laughton, trying for a yield of 5% is asking for trouble with capital losses!
Have some higher risk, but also some lower risk with yields of 3%. Beware of not having too much longer dated securities, as interest rates can (very likely) got only one way to go "that's up".
Keep well diversified.
PS - Of course there are those who would say that, at the age of only 50, you are too young to be overly worried about taking on some risk. You could well be relying on youir SIPP to provide income for another 40 years. What will you do when you retire? You might find that "playing the equity market" helps relieve the boredom......
Playing the equity market will also help relieve me of my SIPP and back working at 60!!!
I had a model bond portfolio all sorted 6 months ago that was yielding 6% with good quality in it, instead of settling down and buying them I continued playing equities. Now I've lost about 1 1/4% of that yield which makes a big difference.
Right, next move short the FTSE.....
SJD, Regarding investing in Bonds, I think you have missed the boat. No recent new ORB bonds, with the good issuing years 2012/3 well behind us! (now overvalued)
You still young, not sure where you should place SIPP money in these difficult times.
Perhaps shorting the FTSE.... is the answer!
Depending on what is happening over the other side of the pond (USA), if I feel their economy is becoming much stronger, it's likely I start to ditch some of my longer dated bonds / Undated securities) around xmas.
Is Euroland becoming more like Japan (over the past 20 years)? and will the UK economy suffer as a result? or free itself & become more like the USA with full-employment.
From an amateur investor (90% invested in fixed income securities) who has recently retired!
Consider Esure 6.75% 2024, a tad over par. Just announced results, neither great nor bad, they are bit too leveraged compared to other insurers such as Direct Line. Unrated, 100k minimum, and rather illiquid. However, if you look at it as a BB, say, still cheap compared to Tesco.
shaunm, yep realised I've missed the boat, too much time planning the portfolio. Looking at my preferred list of bonds that would of taken my portfolio to retirement drawdown and then the income stream many of them have soared in price to levels I'm not prepared to invest at. Thankfully I was invested in equity at lower levels so haven't missed out that much in terms of now - it's just getting impossible to transition to the bond portfolio. Even the likes of Paragon make me nervous at the yields they're trading at now.
Fang, thanks for that Esure bond, It's the kind of thing I'm looking for. I need to research that one and although I have many tools available through my work I'm currently away from the office with Bloomberg and can't track the price effectively with the vendors I have remotely.
What about BBYB? A preference share with a call date in 2020 currently trading around 119. If you treat it as a bond the 10.75 gives a healthy running yield over 9% and a YTM over 5%. After changes to tax legislation it is now paid gross so that is no longer an issue. No minimum purchase.
I know it probably doesn't meet your definition of "medium" terms but how about Enterprise Inns 2031 6.375%? Trading at around par. I believe it is secured against their property portfolio. There have been issues in the past around stamp duty on the bond but bought some recently without being charged (min. 1000).
I'm 52 and thinking of retiring at 57. I'll see how things are at work and the other possibility was trying to go part time from 55. It's hard to plan when you don't know how long you are planning for, but I expect I'd go sooner, rather than hang about for too long. I think the part time route is appealing as it gives you that half way house, where you get lots more free time, but still have money coming in. You also would have a better feeling as to whether to carry on working or go.
SJD, agree with all the comments above and fully understand your predicament. I retired 8 years ago and set up 2 porfolios, one bonds/ fixed income, the other equities. The equities have been something of a nightmare at times, basically when retired in the Winter months ,like Laughton says they relieve the boredom; but when the nice weather comes along and the big outdoors call; sitting at the computer all day is no fun, and not having your finger on the pulse means losses can easily occur, which they did in my case. Whereas the fixed income porfolio kept ticking overnicely. Had a fair few PIBS in there; Leeds, skipton, newcastle , Principality plus a few One Savings Bank. All have done well and allowed me to sleep at night. I just keep a few equities , the bigger better stuff but none of the AIM stuff which i feel get well manipulated Good Luck
Thank you for your comment re Enterprise Inns 2031, which made me think re options etc.
Purchased a few today, and sold a few of the 2018 (47VU) bonds, as I reckon with few new (if any) bonds issues, I may be glad to have one or long dated bonds in a few years time. Other reasons
1) More tourists coming to the UK. (Exchange rate) / Drinking in UK pubs
2) UK more likely to stay in the UK instead of foreign holidays (Exchange rate), more UK drinking
3) Enterprise Inn should get cheaper financing as time goes on, especially when the 2018 bond issue matures
I agree, less sleepiness nights if one holds "Fixed Interest Securities"
Holdings of a few PIBS also makes sense
I have invested in some of the new issues on ORB this year (Alpha Plus, Burford Capital) but given the dearth of new issues wondered where to put any cash awaiting investment in fixed income. I recently came across the CQS New City High Yield fund (an investment trust), seems to have a yield above 7% although currently trading at a 4 to 5% premium. This seems to spread risk across high yielders. Aside from the fact that there is no redemption with a fund would something like this fit the bill for the original poster (as well as a medium term home for my funds awaiting investment)?
I looked at the CQS fund a little while ago and saw that some of its holdings are old friends such as REA, Coop Bank, and BBYB. (I already have holdings in REA pref. and BBYB). I understand the advantage of putting a comparatively small amount in the fund and spreading your risk but there is an argument for saying that if someone is uncomfortable with investing directly in such holdings and securing a higher yield, then that is probably an indicator that investing in the fund as a whole is not a good idea either, especially when you consider the premium to NAV. There are equity investment trusts paying over 6% (HFEL), which trade at a discount to NAV and some bond ITs, trading at a discount with yields over 5% (ALAI).
Powered by Vanilla