Relative Value

Had hoped that investors would have learned from Enquest bond pricing that it pays to check other bonds from same issuer.As pointed out on this site, the Enquest USD bond, issued at same time, was considerably cheaper ( and better protected) so one should have never bought the mispriced Sterling bond when first issued. Now I notice that Kennedy Wilson ( a California based property fund) very recently issued a Sterling bond ( min.100k, i.e. for institutional interest) maturing 2022, with coupon of 3.95, now trading around 98. Issuer is rated BB-, so very expensive per se. But when comparing it to their USD bond ( 5.875% 2024, quoted at 98.20) one realises that Sterling investors may have been taken for a ride. Enquest lesson not learned, perhaps? Hope this one does not pop up in readers´pension funds, whose managers are handsomely rewarded.. for what?

Comments

  • Welcome back, Fang!

    From memory the USD bond was issued immediately after the Sterling version, so the comparison wasn't available until too late. Nevertheless, and as usual, you have a point. Sadly there are too many occasions when our cousins across the pond seem to look after themselves at our expense.
  • I think comparing just the yield/coupon in different currencies does not provide a complete picture - one key difference generally relates to exchange rate expectation for the two currencies (other factors include security, maturity, liquidity, "extent to which you can get away with screwing certain investors (i.e. ORB)", etc. A truer comparison would perhaps be the spread over the relevant currency government bond benchmark.

    Not disagreeing with you - just, maybe, pointing out the obvious.
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