2019-08-01_Shares_Magazine

FEATURE

 | SHARES | 01 August 2019

ĨƌŽŵĞĂnjůĞLJŚĂƐĂĐŽƵƉŽŶŽĨ

ρ͘ϯй͕ƵƌĨŽƌĚĂƉŝƚĂůςй͕ĂŶĚ

WƌŽǀŝĚĞŶƚ&ŝŶĂŶĐŝĂůρ͘Ϯй͘

These beat both base rate and

ŝŶŇĂƟŽŶ͕ǁŚŝĐŚĐĂŶďĞŚĂƌĚƚŽ

ĂĐŚŝĞǀĞĞůƐĞǁŚĞƌĞ͘,ŽǁĞǀĞƌ͕ĂƐ

ĚĞŵĂŶĚĨŽƌŚŝŐŚLJŝĞůĚƐƌĞŵĂŝŶƐ

strong and bond issues remain in

ƐŚŽƌƚƐƵƉƉůLJ͕ĐŽƵƉŽŶƐĂƌĞŶŽƚĂƐ

ŐĞŶĞƌŽƵƐĂƐƚŚĞLJƵƐĞĚƚŽďĞ͘

ƵƚƚŚĞƌĞŝƐĂůƐŽƚŚĞƉŽƚĞŶƟĂů

ĨŽƌĐĂƉŝƚĂůŐĂŝŶƐƚŽďĞŵĂĚĞ

ǁŚĞŶŝŶǀĞƐƟŶŐŝŶƌĞƚĂŝůďŽŶĚƐ͘

dŚĞƉƌŝĐĞƐŽĨƚŚĞƐĞĂƐƐĞƚƐ

move in line with supply and

ĚĞŵĂŶĚ͕ĂŶĚŝŶǀĞƐƚŽƌƐĂƌĞĨƌĞĞ

to trade listed retail bonds on the

ƐĞĐŽŶĚĂƌLJŵĂƌŬĞƚĂƚĂŶLJƟŵĞʹ

ĂƐůŽŶŐĂƐƚŚĞLJĐĂŶĮŶĚĂďƵLJĞƌ

ŽƌƐĞůůĞƌ͘

WŽƉƵůĂƌďŽŶĚƐĐĂŶƐĞĞƚŚĞŝƌ

ƉƌŝĐĞƌŝƐĞĂďŽǀĞƉĂƌǀĂůƵĞ͘

dŚĞƵƌĨŽƌĚĂƉŝƚĂůŝƐƐƵĞ͕ĨŽƌ

ĞdžĂŵƉůĞ͕ĐƵƌƌĞŶƚůLJŚĂƐĂŶŽīĞƌ

ƉƌŝĐĞŽĨϭϬϳ͘ςƉ͘dŚŽƐĞǁŚŽ

bought at issue and sold at this

price would have made a capital

ŐĂŝŶŽĨĂƌŽƵŶĚΘй͘

Ƶƚ͕ũƵƐƚĂƐǁŝƚŚĂŶLJŽƚŚĞƌ

ĂƐƐĞƚ͕ŶĞŐĂƟǀĞƐĞŶƟŵĞŶƚĐĂŶ

ĚƌĂŐĚŽǁŶƚŚĞƉƌŝĐĞŽĨƌĞƚĂŝů

ďŽŶĚƐ͘ŶŝƐƐƵĞďLJtĂƐƉƐ

&ŝŶĂŶĐĞ͕ǁŚŝĐŚŚĂƐĂĐŽƵƉŽŶŽĨ

ς͘ρй͕ĐƵƌƌĞŶƚůLJŚĂƐĂŶŽīĞƌƉƌŝĐĞ

ƚŚĞďŽŶĚ͕ĐŽŶƐŝĚĞƌǁŚLJŝƚŝƐ

making the issue and what it

plans to do with the money as

ǁĞůůĂƐŝƚƐĮŶĂŶĐŝĂůƐƚƌĞŶŐƚŚĂŶĚ

the likelihood that it will be able

to pay its coupon and repay the

capital you have invested when

ƚŚĞďŽŶĚŵĂƚƵƌĞƐ͘

ŚŝŵŽŶŝĚĞƐƐĂLJƐ͚͗zŽƵƐŚŽƵůĚ

ůŽŽŬĂƚƚŚĞĮŶĂŶĐŝĂůƉƌŽũĞĐƟŽŶƐ

ŽĨƚŚĞĐŽŵƉĂŶLJ͕ŚŽǁƚŚĞLJŚĂǀĞ

ƉĞƌĨŽƌŵĞĚĂŶĚǁŚĂƚƚŚĞLJĂƌĞ

ƉůĂŶŶŝŶŐƚŽĚŽŝŶƚŚĞĨƵƚƵƌĞ

in order to gauge the credit

ƐƚŽƌLJŽĨƚŚĞŝƐƐƵĞƌ͘ŚĞĐŬǁŚĂƚ

else is out there and how the

ŝŶƚĞƌĞƐƚƌĂƚĞŽŶŽīĞƌĐŽŵƉĂƌĞƐ͘

zŽƵƐŚŽƵůĚŶ͛ƚŐŽŝŶƚŽĂŶLJ

ŝŶǀĞƐƚŵĞŶƚďůŝŶĚ͕LJŽƵŶĞĞĚƚŽ

ĚŽƚŚĞƌĞƐĞĂƌĐŚ͛͘

Investors can buy and sell retail

bonds through an investment

ƉůĂƞŽƌŵ͕ĂƐƚŚĞLJǁŽƵůĚĂŶLJ

ŽƚŚĞƌůŝƐƚĞĚĞŶƟƚLJƐƵĐŚĂƐĂ

ĐŽŵƉĂŶLJƐŚĂƌĞ͘

ŽĨεϬ͘κƉʹĂĐĂƉŝƚĂůůŽƐƐŽĨŶĞĂƌůLJ

ϭϬйĨŽƌƚŚŽƐĞǁŚŽďŽƵŐŚƚĂƚƉĂƌ͘

The coupon represents what a

bond would pay at its par value

and movements in price will

ĂīĞĐƚƚŚĞLJŝĞůĚ͕ǁŝƚŚĂĨĂůůŝŶƚŚĞ

bond price leading to a higher

LJŝĞůĚĂŶĚǀŝĐĞǀĞƌƐĂ͘

DO YOUR HOMEWORK

ƐǁŝƚŚĂŶLJŝŶǀĞƐƚŵĞŶƚ͕ĚŽŝŶŐ

LJŽƵƌŚŽŵĞǁŽƌŬĮƌƐƚŝƐĐƌƵĐŝĂů

ǁŚĞŶĐŚŽŽƐŝŶŐƌĞƚĂŝůďŽŶĚƐ͘

Research the company issuing

AS WITH ANY INVESTMENT,

DOING YOUR HOMEWORK

FIRST IS CRUCIAL WHEN

CHOOSING RETAIL BONDS.

YOU SHOULDN’T GO

INTO ANY INVESTMENT

BLIND, YOU NEED

TO DO THE RESEARCH

EXAMPLES OF RETAIL BONDS

BOND NAME CODE

ISSUE

DATE

MATURITY

DATE

CURRENT

YIELD

hZ&KZW/d>

W>hZ&KZϮϮ hZϭ ϯϬͲ:ƵůͲϭκ ϭεͲƵŐͲϮϮ ς͘Ϭй

d^KWZ^KE>

&/EEW>d^K

W&ρй

d^ρ ϭρͲDĂLJͲϭϮ ϮϭͲEŽǀͲϮϬ κ͘εй

^'ZKW>

^'ZK͘ρ͘ϳρ

ρϮs ϮϭͲ:ƵŶͲϬρ ϮϬͲ:ƵŶͲϯρ κ͘Ϭй

t^^ytdZ

^Zs/^&/EE

W>t^^yt͘^͘ρ͘ϳρ

ςΘKW ϭςͲKĐƚͲϬϯ ϭκͲKĐƚͲϯϯ ϯ͘εй

'>yK^D/d,<>/E

W/d>W>

'>yK^D^ρ͘Ϯρй

'εε ϭεͲĞĐͲϬϭ ϭεͲĞĐͲϯϯ ϯ͘ϳй

^ŽƵƌĐĞ͗>ŽŶĚŽŶ^ƚŽĐŬdžĐŚĂŶŐĞ͘ĂƚĂĂƐŽĨϮε:ƵůLJϮϬϭε

LJ Holly Black