Tuesday 10 July 2018 by Elizabeth Moran Trade opportunities

Retail bonds available with yields approaching 7%pa

We have decent supply in a range of retail bonds at the moment. If you have some ‘lazy’ cash available, now might be a good time to consider investing for a higher return. We list 13 bonds with a mix of investment grade and high yield

Harrykanewinning

It is often hard to source retail bonds, however we have plenty at the moment – in both high yield and investment grade. Minimum investment is generally $10,000 per bond.

A series of new issues – NEXTDC, Plenary, NextGen, Axssesstoday and RMBS lines – has seen investors sell some of their current holdings in order to participate. This has created opportunities for retail investors.

The recent uptick in short term BBSW (see the note ‘Interest rates are moving even though the cash rate isn’t’) has resulted in higher yields.

In fact, many of the FIIG originated bonds are at prices not seen in the last 12 months, making them attractive propositions.

Several of the high yield bonds have less than two years until maturity. The shorter terms to maturity lower risk in two ways:

  1. Potential higher interest rates have a lower impact for shorter dated fixed rate bonds compared to longer dated fixed rate bonds – meaning there’s limited price downside as the bond will naturally ‘pull to par’, that is its $100 face value as it approaches maturity.
  2. Reduced credit risk as it’s much easier to gauge the credit risk for a company over a couple of years than over a longer term of seven years or more.

Retail high yield bonds

Issuer Maturity/call date Bond type Yield to worst*  Minimum investment amount 
Aviation Training Investments 13-Nov-20 Fixed 3.74%pa AUD10,000
Cash Converters 19-Sep-18 Fixed 6.65%pa  AUD10,000
CML Group 18-May-20 Floating 4.43%pa  AUD10,000
Dicker Data 26-Mar-20 Floating 4.90%pa AUD10,000
IMF Bentham 30-Jun-20  Fixed 3.75%pa  AUD10,000
Impact Group 12-Feb-21 Fixed 6.93%pa AUD10,000
PMP 17-Sep-19 Fixed  5.71%pa  AUD10,000
SCT Logistics 24-Jun-19 Floating 4.91%pa  AUD10,000
StockCo 6-Oct-21 Fixed 5.84%pa AUD10,000
Sunland 25-Nov-20 Fixed 6.37%pa AUD10,000
WA Stockwell 29-Jun-21 Fixed  6.41%pa  AUD10,000
*Yield is accurate as of 10 July 2018, subject to change. 
Note: Yield to worst is the worst possible return 

Shorter dated investment grade bonds are offering low yields that are less attractive, but you are taking much lower risk. We would still suggest you hold circa 70% investment grade bonds in your portfolio.

Retail investment grade bonds

Issuer Maturity/call date Bond type Yield to worst  Minimum investment amount 
Adani Abbot Point Terminal 29-May-20 Fixed 4.45%pa AUD10,000
Bendigo and Adelaide Bank 9-Dec-26 Floating 3.52%pa AUD10,000
DBCT Finance (Dalrymple Bay) 9-Jun-26 Floating 6.52%pa AUD10,000
Praeco 28-Jul-22  Fixed 3.91%pa AUD10,000
Sydney Airport 20-Nov-20  Inflation linked CPI +2.15%pa AUD10,000 
Sydney Airport 20-Nov-30  Inflation linked CPI +2.47%pa  AUD10,000 

Yield accurate as of 10 July 2018, subject to change.
Note: Yield to worst is the worst possible return


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