Corporate Bond Discussion

[OngHuatHuat]

I realize some perpetual bonds are not listed for sale on IB, do you know the reason?

This is the best site to search for US Corporate bonds.
http://finra-markets.morningstar.com/BondCenter/Default.jsp
I would advise buying US bonds using IB.. Many choices available, well regulated, low commission, no other fee and much more liquid.

Problem with buying bond in Spore is too costly .. most wholesale bonds listed are at 250K per lot, very difficult to diversify your risk..unless you have several millions to invest

 

[sgdividends]

Yeah the Maybank Kim eng promo quite attractive actually. I am thinking about it.

I think bond harder to leverage, is it? Is there any other banks that allow you to leverage for bonds? That means it is leverage on leverage already.

Reits carry stock market risk, for bonds, as long as the issuers don't bankrupt, it will be fine.

Leverage on reits quite tricky.
I asked when reits issue rights , the price will be slammed..Kenna margin call right, broker say yes.. just confirming my thinking..

So reits u can't leverage to the max...Need a lot of buffer ...Bonds better.

But for Kim eng, very funny as I think corporate bonds like uob, temasek the financing rate is higher than reits , think like 2.88% or 2.58% can't remember ...And it gets worst for junkier ones.

So it seems that reits are safer than bond from temasek and uob to them..

With these high financing rate, it's nearly impossible to earn from a safe SGD bond as their ytc, ytw, etc is higher than the financing rate or about there

 

[homer123]

I never search for US perpetual bonds before.Do you have the symbol or CUSIP? US corporation usually issued perpetual preferred stocks not bonds..

I realize some perpetual bonds are not listed for sale on IB, do you know the reason?

 

[OngHuatHuat]

I think that is because Maybank Kim eng can lend out your shares if you place them under custodian.

Both are subjected to rate hike risk, perpetual bonds from Temasek or super blue chips like UOB or dbs should be less affected I think.

Leverage on reits quite tricky.
I asked when reits issue rights , the price will be slammed..Kenna margin call right, broker say yes.. just confirming my thinking..

So reits u can't leverage to the max...Need a lot of buffer ...Bonds better.

But for Kim eng, very funny as I think corporate bonds like uob, temasek the financing rate is higher than reits , think like 2.88% or 2.58% can't remember ...And it gets worst for junkier ones.

So it seems that reits are safer than bond from temasek and uob to them..

With these high financing rate, it's nearly impossible to earn from a safe SGD bond as their ytc, ytw, etc is higher than the financing rate or about there

 

[OngHuatHuat]

Yes you are right. Perhaps I should look through this option as well.

I never search for US perpetual bonds before.Do you have the symbol or CUSIP? US corporation usually issued perpetual preferred stocks not bonds..

 

[BBCWatcher]

So reits u can't leverage to the max...

You might be able to trade options on REIT ETFs. Let me take a quick look....

....Yes, it looks like you can, barely. There's a decent sized market (for options) on VNQ, Vanguard's U.S. REIT index fund. VNQ is the largest U.S. REIT ETF in terms of assets. The options market on VNQI, Vanguard's global (excluding U.S.) REIT index ETF, looks much too thin to trade.

I'm not necessarily recommending you trade these options. However, if you want to make an amplified bet on U.S. real estate specifically, it appears you can reasonably well through the U.S. options markets. That can be any bet the options market allows. For example, you can bet for or against greater volatility in U.S. REIT valuations.

Out of Singapore OptionsXpress, the Charles Schwab owned brokerage with a small office in Singapore, can help you trade VNQ and other options. Interactive Brokers can also handle options trading.

 

[crossfitter]

Just be aware there may be an automatic withholding of 30% for dividends/coupon payments for US listed etfs (holding US stocks and bonds), stocks and bonds. it may not make sense to invest in these instruments once you account for the 30% tax withholding for dividends and coupon payments.

May be better to invest ADRs of foreign companies listed in the US as they are not subjected to tax withholding or just stocks that don't pay a dividends as they may deliver a better after tax yield.

 

[limster]

May be better to invest ADRs of foreign companies listed in the US as they are not subjected to tax withholding or just stocks that don't pay a dividends as they may deliver a better after tax yield.

TS want to discuss bonds and you recommend stocks.



Relax. Yyhwin has a big amount in stocks already. He wants to diversify by getting bonds, thats all...

 

[crossfitter]

TS want to discuss bonds and you recommend stocks.



Relax. Yyhwin has a big amount in stocks already. He wants to diversify by getting bonds, thats all...

lol......not recommending stocks per say but just mentioning in general, coupon payments for bonds or bond etfs maybe subjected to US tax withholding of 30%. if you account for that, the after tax yield may not be so attractive.

 

[limster]

lol......not recommending stocks per say but just mentioning in general, coupon payments for bonds or bond etfs maybe subjected to US tax withholding of 30%. if you account for that, the after tax yield may not be so attractive.

pls see other thread. homer123 double confirm plus chop there is no withholding for Singaporeans investing in US bonds. I also double confirm plus chop that US bond ETFs on LSE virtually no withholding.

Sorry, but I don't know why people keep on repeating inaccurate info that there is withholding for US bonds.

 

[crossfitter]

pls see other thread. homer123 double confirm plus chop there is no withholding for Singaporeans investing in US bonds. I also double confirm plus chop that US bond ETFs on LSE virtually no withholding.

Sorry, but I don't know why people keep on repeating inaccurate info that there is withholding for US bonds.

I am charged a US withholding (30%) on dividend and coupon payments on my US listed bond etfs and stock holdings held with DBS bank. European ADRs that I hold which are listed on the US exchanges are not subjected to the same withholding.

I dont know the exact tax laws that make an financial instrument eligible for US tax witholding but I am not the only person who is subjected to this:
http://singvestor.com/withholding-taxes-for-singaporean-investors-of-foreign-stocks/

just doing a quick google and it brings up this point: "we lose a chunky 30% in U.S. domestic withholding taxes on instruments that are domiciled or listed in US including stocks and bonds" (https://www.bento.cloud/three-inevitables-robo-bionic-advisor/)

I think US tax withholding is charged once the stock or bond is considered to be domiciled in the US. I am not sure what is the criteria is and you maybe fine if the bond etf is listed on the LSE (domiciled in the UK?) but I would double check again for any bond or bond etfs listed on the US exchanges to be sure its not considered to be domiciled in the US.

 

[limster]

I dont know the exact tax laws that make an financial instrument eligible for US tax witholding but I am not the only person who is subjected to this:
http://singvestor.com/withholding-taxes-for-singaporean-investors-of-foreign-stocks/

You maybe fine if the bond etf is listed on the LSE but I would double check again for any bond or bond etfs listed on the US exchanges to be sure that one is not subjected to withholding

Below is a IB statement from my account, you can see that there is no tax amount on the bond section. I have been doing research on US withholding tax. If you are a non-US resident, there is no withholding tax on US bonds , ETD , some business trusts and preferred stocks that are incorporated outside US like Bermuda,Cayman Is ,Ireland etc.. ADR WHT is dependent on countries where its parent company is listed
Any dividend from stocks or funds ,ETF or preferred stocks incorporated in the US, there is a 30% WHT.
Btw, it is great info from limster that there is no WHT on Irish domiciled ETFs.. I might start looking at them as well.

There is no 30 % withholding tax for us bonds. I have been buying for a decades never been charged a dime for taxes.

http://forums.hardwarezone.com.sg/107452409-post109.html

 

[OngHuatHuat]

Thanks for the information.

I realize USA bond market is quite efficient. I try compare 3 HSBC bonds with different coupon payments and slightly different maturity date, all give around the same yield, vaguely remember is around 4.7 % .

I want to go for perpetual that offers a higher rate because no maturity date, coz I focus more on coupon payment aka cash flow, but IB not offering that.

Perpetual bonds carry a higher yield compare to bonds with maturity dates.

Then if you want to go for much higher yield, you have to go for higher risk bonds like those offered by Olam. Olam has Temasek backing, so actually not so bad.

Usd bonds normally give higher interest rate than sgd bonds.

http://forums.hardwarezone.com.sg/107452409-post109.html

 

[BBCWatcher]

U.S. corporations do not issue many perpetual bonds, a.k.a. consols (British English term). Long-term bond ETFs provide a reasonable simulation of perpetual bonds, although the coupon (dividend) rate will vary.

My "best guess" is that options trading on U.S. equities and ETFs is not subject to U.S. tax, if you're a non-U.S. person. Options traders don't receive any stock dividends. (Well, not unless they end up exercising their options to own the stock or ETF at ex-dividend time.) They're essentially making amplified bets on capital gains or losses. Since capital gains are not subject to withholding, I don't think option gains would be either.

....But check me on that, of course.

 

[homer123]

Hi Crossfitter, you are charged WHT for US listed bond etfs and stock dividend..That is true and I mentioned that in another thread.. however you should not be charged WHT for individual bond purchase.. because individual bond is paying interest not dividend. So which individual bond that you purchase is charged WHT? I am very sure I have checked with other individual US bond investors were not charged WHT using their IB and etrade Spore (which closed their office 2 years ago) .

I am charged a US withholding (30%) on dividend and coupon payments on my US listed bond etfs and stock holdings held with DBS bank. European ADRs that I hold which are listed on the US exchanges are not subjected to the same withholding.

 

[OngHuatHuat]

Hi I have a few questions for you:
1. Normally which corporation bonds are you looking at?
2. What ask yield is considered normal for you for USA market?
3. Is it worth to go for perpetual bond since it doesn't have any maturity date? I notice most perpetual bond has higher yield to ask compared to non perpetual bond offered by same corporation.
4. Bonds listed in London stock exchange, is there any tax on interest income?

Thanks in advance!

Hi Crossfitter, you are charged WHT for US listed bond etfs and stock dividend..That is true and I mentioned that in another thread.. however you should not be charged WHT for individual bond purchase.. because individual bond is paying interest not dividend. So which individual bond that you purchase is charged WHT? I am very sure I have checked with other individual US bond investors were not charged WHT using their IB and etrade Spore (which closed their office 2 years ago) .

 

[homer123]

First of all, I am not a financial professional that can give an advice.

What I can share is that I used advance search from this website
http://finra-markets.morningstar.com/BondCenter/Default.jsp
to look for bond to buy.
Criteria are as below:
1)Coupon and Interest
2)Maturity Date
3)Ratings and Credit
4)Calls and Options
5)Trade Parameters Date and Price
6) Yield to Maturity, Yield to Call and Yield for worst (for bonds that past callable date and can be called anytime)

I used bond ladder method to buy a list of bond (> 30)..so yield can be as low as 2-3% for A grade or better and short maturity bond to yield close to 8% for Non-rated bond and long maturity till 2075( they are almost equivalent to perpetual).

For bond investment, I will start with investment grade bond (bbb- and better rating) with less than 10 years maturity.. For these type of bonds.. you probably can find something between 4.5 to 5.5 %. I am good with this yield because the best FD and 5 year insurance I can find in Spore are less than 2.5% ..I also use the 10 year US treasury yield as benchmark.. They are also around 2.33% for 10 years... so if my bond yield is more than double, I can good with it.

It is not worth looking for perpetual bond to invest since interest rate increase will cause its value to go way below par. However, there are many US corporate bonds that matured in 30 years or longer that you can invest if you are hungry for yield..

I am not familiar with Bonds listed in London stock exchange

Hi I have a few questions for you:
1. Normally which corporation bonds are you looking at?
2. What ask yield is considered normal for you for USA market?
3. Is it worth to go for perpetual bond since it doesn't have any maturity date? I notice most perpetual bond has higher yield to ask compared to non perpetual bond offered by same corporation.
4. Bonds listed in London stock exchange, is there any tax on interest income?

Thanks in advance!

 

[OngHuatHuat]

First of all, I am not a financial professional that can give an advice.

What I can share is that I used advance search from this website
http://finra-markets.morningstar.com/BondCenter/Default.jsp
to look for bond to buy.
Criteria are as below:
1)Coupon and Interest
2)Maturity Date
3)Ratings and Credit
4)Calls and Options
5)Trade Parameters Date and Price
6) Yield to Maturity, Yield to Call and Yield for worst (for bonds that past callable date and can be called anytime)

I used bond ladder method to buy a list of bond (> 30)..so yield can be as low as 2-3% for A grade or better and short maturity bond to yield close to 8% for Non-rated bond and long maturity till 2075( they are almost equivalent to perpetual).

For bond investment, I will start with investment grade bond (bbb- and better rating) with less than 10 years maturity.. For these type of bonds.. you probably can find something between 4.5 to 5.5 %. I am good with this yield because the best FD and 5 year insurance I can find in Spore are less than 2.5% ..I also use the 10 year US treasury yield as benchmark.. They are also around 2.33% for 10 years... so if my bond yield is more than double, I can good with it.

It is not worth looking for perpetual bond to invest since interest rate increase will cause its value to go way below par. However, there are many US corporate bonds that matured in 30 years or longer that you can invest if you are hungry for yield..

I am not familiar with Bonds listed in London stock exchange

Thanks for the detailed reply and your comment about perpetual bonds.
Seems like if I were to purchase perpetual bonds, I need to wait a while more, at least until next FOMC meeting in June before I make any further decision.

 

[limpoop]

Anyone managed to sell Corporate perpetual bond which does not have a maturity date and how easy to sell if the bond is not a popular one?

If nobody wants to buy, meaning you have to hold the bond forever or until the owner redeems it?

 

[sgdividends]

Anyone managed to sell Corporate perpetual bond which does not have a maturity date and how easy to sell if the bond is not a popular one?

If nobody wants to buy, meaning you have to hold the bond forever or until the owner redeems it?

Bond is meant to hold. It's very illiquid .unless your ask price is very low