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3rd Quarter 2013 bond update

At the completion of  the third Quarter of 2013, we thought it would be interesting to compare the  US dollar Yankee bonds that were acquired in our FX1 portfolio over the last 4 months with the USD Emerging Markets Bond ETF US (EMB).  Listed below are the 11 bonds we researched and recommended in the reviews sent to our clients and then published on on the Internet, 8 of which are debt issuance’s in US dollars of foreign corporations and 3 in other global currencies.  Each paragraph givens the maturity and the yields obtained at the time of acquisition for the FX1, FX2, or FX3 portfolios (View the FX1 @ Fixed-Income1.com, FX2 @ Fixed-Income2.com & FX3 @ Fixed-Income3.com dollar weighted Portfolio’s.), as well as a brief recap of the reason for selection and the coupon rate and credit ratings for each bond.  Many of the companies hold prominent, dominant, or even monopolistic positioning within their respective countries, and it is not uncommon to find credit ratings constrained by that nation’s sovereign credit ratings.  72% was placed in US dollars, with the following breakdown:   ·

8 US dollar (Yankee) bonds were added to  FX1 and FX2. ·

1 Russian Ruble bond was added to FX2 and FX3. ·

1 Brazilian Real bond was added to FX2 and FX3. ·

1 Canadian Dollar bond was added to FX2 and FX3.

Overall, the 8 Yankee bonds indicate an average yield over 9.235% and an average 3.77 years to maturity, while all 11 bonds indicate an average net yield over 9.175% and average 3.79 years to maturity.

8.25% Yields, Gajah Tunggal, Yankee Bond, Feb. 2018

Issuer: Gajah Tunggal

Coupon: 7.75%

Maturity: 02/06/2018

Ratings: B2/B+

CUSIP: Y71214AA1

Price:  98.185  (9/26/13)

Yield to Maturity: 8.25%

Portfolios: FX1 and FX2

Rubber Tires, Asia

The increase in net income was a 65% increase from the prior 2011.

For more Gajah Tunggal bond information:  8.25% Yields, Gajah Tunggal

 

10% Yields, Trade & Development Bank of Mongolia, Yankee Bond, Sep. 2015

Issuer: Trade & Development Bank of Mongolia

Coupon: 8.50%

Maturity: 9/20/2015
Ratings: B1

CUSIP: Y8904HAD7

Price:  97.35 (9/20/13)

Yield to Maturity: 10.0%
Portfolios: FX1 and FX2

Mine financing, Asia

The bank recently had record earnings and solid growth in deposits and assets, moving it towards one of the largest Mongolian banks by assets.

More Mongolia Bank Bond Information: 10% Yields, Trade & Development Bank

 

9.87% Yields, Alto Palermo, Yankee Bond, May 2017

Issuer: Alto Palermo

Coupon: 7.875%

Maturity: 5/11/2017

Ratings: NR/B

CUSIP: P0245MAC3

Price:  94 (9/18/13)

Yield to Maturity: 9.87 %

Portfolios: FX1 and FX2

Trophy Real Estate Properties, South America

Profitable high end malls provided good profits and low debt, with highly value real estate assets.

More Alto Palermo’s Bond Information: 9.85% Yields, Alto Palermo

 

9.66% Yields, Ferrexpo, Yankee Bond, Apr 2016

Issuer: Ferrexpo

Coupon: 7.875%

Maturity: 4/07/2016

CUSIP: G34361AA6

Ratings: NR/B

Price:  95.95 (8/23/13)

Yield to Maturity: 9.66%

Portfolios: FX1 and FX2

Steel Industry, Europe

Net income exceeding average. Ferrexpo reduced freight expenses by a whopping 33 percent,  which help prompt upgrades.

More Ferrexpo bond information: 9.66 % Yields, Ferrexpo

 

8.4% Yields, NordGold, Yankee Bond, May 2018

Issuer: NordGold

Coupon: 6.375%

Maturity: 5/07/2018

CUSIP: N64523AA6

Ratings: Ba3/NR

Price:  92.25 (8/16/13)

Yield to Maturity: 8.4%

Portfolios: FX1 and FX2

Gold, Asia/Africa

Revenues in H1 2013 increased by 17% from H1 2012 to US$617.1 million. The increase was mainly due to higher production volumes and gold sales, but was somewhat offset by lower realized gold prices (down 10%).

More NordGold bond information: 8.4% Yield NordGold

 

11.22% Yields, Aeropuertos Argentina 2000, Yankee Bond, Dec 2020

Issuer: Aeropuertos Argentina 2000

Coupon: 10.75%

Maturity: 12/1/2020

CUSIP: P0092MAD5

Ratings: B3/B-

Price: 98.5 (8/6/13)

Yield to Maturity: 11.22 %

Portfolios: FX1 and FX2

Airport Management Monopoly, South American

2012 Revenues in Argentine Pesos were up 66% and Net Income was up 46%. This is a sinking bond where ½ of the principal will have been returned by Oct 2017, therefore it has reduced risks and increased cash flow.

More Aeropuertos Argentina 2000 bond information:11.22 % Aeropuertos Argentina

 

8.89 % Yields, Berau Coal, Yankee Bond, Mar 2017

Issuer: Berau Coal Energy

Coupon: 7.50%

Maturity: 03/13/2017

CUSIP: Y711AQAA4

Ratings: B1/BB-

Price:  95.0 (7/26/13)

Yield to Maturity: 8.89 %

Portfolios: FX1 and FX2

Coal, South Pacific

1H 2013 Production was up 19% from 1H 2012, while Coal prices for 1H 2013 fell 20% compared to 2012. Cost of sales was down 10%, and major cost reduction initiatives were underway. EBITDA declined to $74m from $139m in 2012, resulting in an Operating Loss of $11m.  More efficiencies are anticipated under its new leadership.

More Berau Coal bond information: 8.9 % Yields, Berau Coal

 

8.5% Yield, Federal Grid Co, Russian rubles, Mar 2019

Issuer: Federal Grid Company

Coupon: 8.446%

Maturity: 3/13/2019

CUSIP: G3R0K7AA8

Ratings: Baa3/BBB

Price: 99.75 (7/16/13)

Yield to Maturity: 8.5%

Portfolios: FX2 and FX3

Utilities Monopoly, Russia

1H 2013, Revenues in rubles were up 14%, EBITDA was down 3.8%, and operating profits were 10,619 million rubles ($348.5 million).  Adjusted profit for the period was 7,878 million rubles ($243.1 million).  The Government has restructured its ownership.

More Federal Grid bond information: 8.5% Yield Federal Grid Co

 

10.1% Yields, TransGlobe Energy, Canadian dollars, Mar 2017

Issuer: TransGlobe Energy

Coupon: 6.00%

Maturity: 3/31/2017

CUSIP: 893662AB2

Ratings: NA

Price:  87.445 (6/26/13)

Yield to Maturity: 10.1%

Portfolios: FX2 and FX3.

Oil, North Africa/Middle East.

1H 2013 Revenues in Canadian dollars were up 2%, while cash flow was down 3% and profits were down 48%.  Forward guidance for cash flow from operations was $145 million, while long term forecast of oil production was reduced.

More TransGlobe Energy bond information: 10.1 % Yields TransGlobe Energy

 

9.88% Yields, COELBA, Brazilian reals, Apr 2012

Issuer: Companhia de Eletricidade do Estado do Bahia (COELBA)

Coupon: 11.75%

Maturity: 4/27/2016

CUSIP: P30587AA0

Rating: Baa2/BBB-

Price: 104.5 (6/19/13)

Yield to Maturity: 9.88%

Power Utility Monopoly, South America

Portfolios: FX2 and FX3

More COELBA bond information:9.94 % Yields COELBA

 

11.6% Yields From Transportadora de Gas Del Sur’s Four Year Bonds

Issuer: Transportadora de Gas del Sur S.A

Coupon: 7.875%

Maturity: 5/14/2017

CUSIP: P9308RAX1

Ratings: B3/B-

Price: 88.4 (6/3/13)

Yield to Maturity: 11.625 %

Portfolios: FX1 and FX2

Natural Gas Pipeline Monopoly, South America

1H 2013 Revenues in Argentine pesos up 10%, Cost of Goods Sold was flat, and gross profit was up 25%. Strong operational improvements.

More TGS bond information:11.6 % Yields Transportadora de Gas Del Sur’s

 

The chart below compares the last 8 Yankee Bonds we placed in FX1 with the USD Emerging Markets Bond ETF US (EMB)   This is a relatively small sample of issues that we have reviewed as selected for addition to our fixed income clients, and it is not intended to be a complete comparison that can or should be made.  We focus more on short “maturity certain” bonds cycles when interest rates are climbing.  By making comparisons in  several categories, such as indicated yields and projected costs, it becomes much easier to see why this approach to fixed income investing is so attractive.  Considering that we have successfully steered clear of any bond defaults with this high yield, high cash flow, short maturity model, it’s also easy to understand why most of our bonds selections are simply held to maturity.

Name Yield Expenses Maturity

iShares Emerging Markets Corporate Bond CEMB

 

4.62%

 

0.60%

 

5.38 years

iShares Core Total U.S. Bond Market ETF

 

2.43 %

 

0.08%

 

6.89 years

 

Fixed Income 1 portfolio

 

9.23%

 

0.50%*

 

3.77 years

Fixed Income 1 compared to the best. The FX1 last 8 UDS bonds provided a 99% higher boost in yielding than the  emerging corporate bond market. The Fixed Income 1 last 8 bonds issues cost .42 basis points more than the very low cost AGG. The last Fixed Income 1 8 bonds maturity is 26% shorter than the shorter CEMB ETF

*This is a proposed cost only.

 

We hope you enjoy our high income approach!

 

 

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Durig Capital : Always putting your interests first!


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Tigard, Oregon 97223
Toll Free: 877-359-5319
E-mail us at: Info@Durig.com
Fax 971-732-5121


Information on this website is provided for informational purposes only and is not offered as advice with respect to any particular security or related financial instrument. This information should not be used as a basis for making an investment decision and must not be treated as a substitute for seeking advice from a licensed professional. The suitability of a given investment for a particular investor depends on a number of factors, each of which should be considered carefully. Such factors include, but are not limited to, the risk associated with the investment, the nature of current market conditions, and the investor’s objectives, personal needs, and specific circumstances. This is neither a solicitation to buy nor an offer to sell to persons in Texas.

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