Wednesday, July 30, 2014

Bond maturities

This month I have had to deal with two bond maturities (i) the first tranche HKSAR government iBonds and (ii) PRC govt RMB bonds. In the current interest rate environment*, I basically view bonds as a place to hold money that would otherwise be earning next to zero in bank accounts. Since I already have more cash on hand than I would like, finding new home(s) for the matured principals is desirable. Holding an asset that is earning less than the rate of inflation is irritating and expensive.

Unfortunately, a quick look at the HSBC and BOCHK lists of bonds available is discouraging - the massively wide spreads are a complete turn off - and the rates offered for term deposits are equally pathetic. So I will have to look a bit further. If all else fails, I would consider adding to some of the safer equities and collect the dividends. But, given the rally in the HK market over the last few months, I am not sure if I want to do this either.

More thinking needed.

* if postive real returns could be achieved, I would be buying bonds for their risk/return profile.

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