Yes, that's true. Unfortunately for holders of ringgit, there's always the fear of currency depreciation that will eat away at any and all profits.

Correct

N its very very very unlikely a govt will default with its own currency bond.

This post has been edited by Cubalagi: Aug 8 2023, 10:25 PM

Bro the price is too high and YTM yield too low only 4.01%

Why not consider FD 4.22% for now while waiting for a better bond to come?

FSM no news so far

Happened before already 🤦‍♀️ Venezuela has proven it with its currency bolivar depreciated like a rock while Ecuador has to replaced its currency to instead now using the USD as legal tender in that country

So it is possible that sovereign defaults bonds can happen just that the technicality is complicated as the sovereign itself has many mechanism to protect itself via many means like delay mechanism

In fact even US has defaulted but through the mechanism it is using to avoid hence why you see credit rating is the one that is holding it

Bro, surely Malaysia isn’t in the same category as Venezuela or Ecuador…. But your point is well taken

Btw how do one calculate YTM %? If I were to reinvest this dividends into current FD, it help to push up the return %.

You mentioned price too high as in the MYR7+ above MYR100k? Earlier discussion say most will focus on the price to be as low and close to MYR100k to match the unit price.

Sorry… newbies learning here.

Never say never 🤦‍♀️ look at PIIGS country as some of them G7 or G20 yet they can delay on their bonds

As long as the govt still think they can repay the coupons and yet not still trying to cut deficit or getting a surplus yearly 🤦‍♀️ it will likely head that way

Unless you have a technocrat running Malaysia 🤦‍♀️ unlikely Malaysia currency will go up to 2 level between USD or SGD so pipe dream

This post has been edited by xander2k8: Aug 9 2023, 12:52 PM

gosh. Super valid points!

YTM is the yield you expect to reap if you hold the bonds to maturity at the stated entry price.

What you should consider is whether the FD rates will hold at 4.22% and if so for how long vs the fixed certainty that you’ll get the 4.01% if you hold the bonds to maturity and they get called back (ie Malaysia doesn’t go bankrupt).

Good luck!

For you to be able to consider bond buying means you’re already at a certain level of financial freedom. Well done.

in 5 years, not sure what would happen to this company. if a bad decision or some unfortunate event unfolds, the capital is gone. Look at country garden, it was untouchable and now ?

"Chinese property giant Country Garden Holdings Co’s failure to make payments on its two dollar bond coupons due Aug 6 (Sunday) totalling US$22.5 million (RM103 million) has raised concerns over a cross-default on its Islamic Medium-Term Notes (IMTN) Programme in Malaysia.


The RM1.5 billion sukuk, issued by Country Garden’s Malaysian unit Country Garden Real Estate Sdn Bhd (CGRE), was first rated by RAM Ratings back in 2015."

i would take a rather moderate stand of getting 4% somewhere else, then gamble away +2 % and risk lose all.

caveat emptor.

This post has been edited by ccschua: Aug 9 2023, 01:41 PM

Yes. Bonds are lower risk but not risk free as many examples have taught us. However, this particular bond he’s asking about is akin to a sovereign bond and by all accounts should be more secure… fingers crossed!

You cannot compare 🤦‍♀️ sovereign and corporate 🤦‍♀️ bonds as both are different beasts

Sovereign bond chances of defaulting is super low while corporate bonds higher chances of default because of how the financial management is being run itself

AT1 bonds have you tell a story that corporate bonds can be defaulted with the wrong people making wrong financial decisions as leverage can bite into it

OK got it on the YTM.

Oh ya the banker also offer 1:1 matching FD value at 6% too for 12m.

I only have some funds matured by early next month. Hopefully still have the bonds by then.

If this bonds can default, then we can kiss goodbye all other deposits too by those time... ... even the PIDM 250k coverage.

That’s a very attractive deal! Good luck

YTM yield is nett return after deduct fees. divided by your cost divide by the tenure

Examples

1)if bond is bought at PAR RM100 and coupon 6%,
no coupon deduction fees,no platform fees, no semi annual retention fees etc
nett yield is 6%.

ie you buy 1 lot , pay RM250k you get RM15000 a year
at maturity or call back time you get back your RM250k

2)bond sold at RM102 , no coupon fees, no platform fee, no retention fee
buy 1 lot you pay 250 x102 = RM255000 (Fee =RM5000, 2% of RM250k)

Now your yield is lower than 6% becos of the fee RM5000
At 5 yrs maturity you dont get back cost RM255k,
you get back only RM250k.

5 yrs return is RM15k x5 = RM75k deduct RM5k, nett RM70k

70k/250k =28% in 5 yrs = YTM 5.6%

To get better yield

1)Buy at lower cost, if buy below PAR eg at RM99, YTM yield is even higher than coupon rate!

2)Avoid bond with multiple recurring fees

3)Go for higher coupon rate bonds

4)Keep longer duration to dilute the effect of your fee RM5000

in 2) if you sell back after 1 year at RM100
YTM is RM15000-fee RM5000 = Nett RM10k/250k = only 4%!!

Thank you so much sir. Very clear

gamenoob

Do let us know if you decide to pull the trigger and commit. Honestly, the 6% FD for 12 months is a deal sweetener. In Singapore, we never get such deals or pairings. It's actually quite sterile, compared to what I've been reading about how bond trades are done in Malaysia!

Bonds can be defaulted 🤦‍♀️ CS AT1 defaults but still doesn’t affect the bank account holders money but the shareholders and the bond holders so others deposits won’t be affected because 🤦‍♀️ the banks would have segregated the bonds away from the cash of the account holders

You cannot compare with PIDM with bank bonds as PIDM is only being used in the last case resort to inject the liquidity after the RRR is dried up 1st

Caveat on my comments, apology for not being clear.I was referring specifically to MY sovereign funds that if it’s collapsed, we as a country would have a more serious problem by then. Defaulting the payment or delayed redemption surely its still a risk but it’s a whole lot lesser than other instruments. Lack of better word, wanted to say if MY totally failed in honour the sovereign bonds, then we are really in deeper end. Wasn’t referring to just any bonds..

We have many trumpeting that they should withdrawal all their EPF at 55/60 citing the MYR is useless, country down the drain etc.

If EPF indeed collapse, MY by then would have been in severe pits. Sure we have a lot of issues and those that have holding in MYR will always have such challenges etc. sure one can diversify too but they are also many factors that allow or prohibit such, so it’s not single dimension. My thinking along this when making the previous comment above. Hope it clarify.

I stand corrected in my interpretation…

This post has been edited by gamenoob: Aug 10 2023, 09:52 AM