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I show an 8% coupon for the Mex. bonds held by my PRSNX. The character of this fund has morphed a bit, taking on more risk than before. Or maybe it's a product of being labeled differently by M* and therefore the stats are being compared now to oranges, rather than apples, so to speak.
I show an 8% coupon for the Mex. bonds held by my PRSNX. The character of this fund has morphed a bit, taking on more risk than before. Or maybe it's a product of being labeled differently by M* and therefore the stats are being compared now to oranges, rather than apples, so to speak.
But it is denominated in pesos (See here for currency.) So you have to discount that yield by the anticipated loss in value of your principal between now and the time the bond matures, due to higher inflation in Mexico than one finds in the US.
In short, don't let yourself get carried away by high coupons, without checking out the premium on the bond and the expected loss on the foreign currency.
(I can say with some confidence that the currency has a lot to do with the nominal high yield, because if you use the same site to check for Mexican bonds denominated in USD, you'll see much lower YTMs.)
@_msf - hi sir. What private bond(s) / funds /etf do you hold in your portfolio.. Thx
Not sure what relevance specific investments have.
I do own shares of a bond fund that holds a significant amount of Mexican bonds, including some 8% coupons. It has an even larger exposure to Mexican pesos, so it appears that the manager is doubling down against the dollar.
If the manager is right, then another fund that simply owns these peso-denominated bonds unhedged should make a nice profit. As I tried to illustrate above, the clearly lower YTM of dollar denominated Mexican bonds vs. peso denominated bonds says that the market expects otherwise. (I prefer managers who don't follow the crowd, so I'm not disturbed by this divergence)
As to premium vs. discount bonds, I prefer to buy premium bonds, and have usually (but not always) done so, though I'm gradually trying to rotate out of individual bonds into funds. My preference for premium bonds is twofold. One is that because many people have an aversion to "paying up" (more than par) for bonds even with the same YTW, there's somewhat less demand for premium bonds. This results in slight bargains for those bonds.
That's the way I invest in so far as it relates to the considerations I introduced - Mexican currency, Mexican 8% peso-denominated bonds, premium bonds. What sort of Treasuries I own wouldn't seem to matter here, except to say I keep a diversified portfolio across countries, across currencies, across maturities, across quality ratings. And I don't buy individual foreign bonds. That's what fund managers are for.
Comments
Regards,
Ted
http://portfolios.morningstar.com/fund/holdings?t=PRSNX®ion=usa&culture=en-US
Here's some detail on that bond (assuming I found the right one). It's trading above par, so its actual YTM is 6.77%.
https://markets.businessinsider.com/bonds/8_000-mexiko-vereinigte-staaten-bond-2023-mx0mgo000003
But it is denominated in pesos (See here for currency.) So you have to discount that yield by the anticipated loss in value of your principal between now and the time the bond matures, due to higher inflation in Mexico than one finds in the US.
In short, don't let yourself get carried away by high coupons, without checking out the premium on the bond and the expected loss on the foreign currency.
(I can say with some confidence that the currency has a lot to do with the nominal high yield, because if you use the same site to check for Mexican bonds denominated in USD, you'll see much lower YTMs.)
. Thx
I do own shares of a bond fund that holds a significant amount of Mexican bonds, including some 8% coupons. It has an even larger exposure to Mexican pesos, so it appears that the manager is doubling down against the dollar.
If the manager is right, then another fund that simply owns these peso-denominated bonds unhedged should make a nice profit. As I tried to illustrate above, the clearly lower YTM of dollar denominated Mexican bonds vs. peso denominated bonds says that the market expects otherwise. (I prefer managers who don't follow the crowd, so I'm not disturbed by this divergence)
As to premium vs. discount bonds, I prefer to buy premium bonds, and have usually (but not always) done so, though I'm gradually trying to rotate out of individual bonds into funds. My preference for premium bonds is twofold. One is that because many people have an aversion to "paying up" (more than par) for bonds even with the same YTW, there's somewhat less demand for premium bonds. This results in slight bargains for those bonds.
There's also the possibility of a kicker. Many premium bonds are priced in anticipation of being called. If they're not called, then one continues to reap the benefit of the above market coupon. RPHYX, for example, also likes to purchase cushion bonds.
https://www.mutualfundobserver.com/2012/09/riverpark-short-term-high-yield-fund-rphyx-july-2011-updated-october-2012/
That's the way I invest in so far as it relates to the considerations I introduced - Mexican currency, Mexican 8% peso-denominated bonds, premium bonds. What sort of Treasuries I own wouldn't seem to matter here, except to say I keep a diversified portfolio across countries, across currencies, across maturities, across quality ratings. And I don't buy individual foreign bonds. That's what fund managers are for.