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Effective duration and Convexity of bonds
Rank: Veteran Joined: 1/7/2010 Posts: 1,279 Location: nbi
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HFCK bond objective is to match fund its mortgage book. So, yes if its borrowing at 8.5% and lending at 7.5%, that is not prudent or clever. And should be of concern to CBK assuming Njuguna knows what time it is The Governor of Nyeri - 2017
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Rank: Elder Joined: 6/2/2008 Posts: 1,438
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Scooby,
I thought the only reason that HF was providing those ultra low interest mortgages was because the employer was putting up the funds. HF was only administering the loans and collecting a fee for it.
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Rank: Member Joined: 9/2/2006 Posts: 121
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Mwanahisa,
There has been this rivalry and/or competition between HF and Savings & Loan in terms of getting as many mortgage customers as possible.
They would enter into a deal with a certain company to ensure that most, if not all, of its employees get a mortgage from that company. In return, the employees get mortgages at higher LTVs and "concessionary" interest rates.
S & L had a similar deal with companies like CMA at around the same time. I haven't heard of such deals this year...
Regards
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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@scoobs. So this is the problem i was trying to understand. Why were they allowed to raise so much in one go? Just to extend long term funding+small increase in capital. “We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Member Joined: 9/2/2006 Posts: 121
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Scubidu,
I wouldn't be so worried about how much they are trying to raise as it is within the range of what has been or will be issued over time.
If you notice the trend - HF is 10 billion, Barclays is 12 billion, CfC Stanbic will be 5 billion and KCB was planned to be 15 billion.
My simplistic approach to this bond issue is this - where would I get a better return i.e. as a shareholder or bond holder. This is based on whats going on with the mortgage sector and the economy as a whole.
Regards
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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From a return point of view KenGen makes more sense than HF esp for liquidity. But this isn't being marketed to retailers, so it's a godsend for fund managers. From a business risk point of view, I can't put money in a bank with rising cost of funds and falling lending rates. Btw subordinate liabilities have other conditions to qualify for capital other than duration (refer to post 44). That's why i hope the turnaround on these bond funds is fast and they'll not just park it in govt debt. “We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Elder Joined: 6/2/2008 Posts: 1,438
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@Scubidu,
Ireri was on telly a week or so ago indicating that HF intends to have disbursed these funds by March next year. Looking at the way they have grown their loan book over the last 2 years while having to borrow from other banks, I think this is realistic.
@Scooby,
Unless you can make capital gains by trading the bond on the secondary market, under the current bullish environment, the returns on the stock are bound to be higher than the yield on the bond. As for risk adjusted return - I am not sure. I am referring to HF on this.
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Rank: Member Joined: 9/2/2006 Posts: 121
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Mwanahisa,
The question of whether one could invest in shares or bonds depends on their own risk profile and expectations of returns commensurate with their risk.
In your case, you seem to be comfortable with investing in HF shares...good for you.
As someone said in Wazua, you can ask X people for their opinion and you can be sure of getting X different opinions.
Regards
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Rank: Elder Joined: 6/2/2008 Posts: 1,438
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C'est vrai - That is indeed true!
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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But alas. That's what this forum is about non? Funny thing heard that same comment describing asking questions to economists, traders, now stock-pickers (u can only use it only so many times before it's meaningless). Nway the auction is over. Any projections on subscription? “We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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http://www.businessdaily...0/-/gdos82z/-/index.html“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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Absolutely reckless...oversubscribed by 41% and will exercise the greenshoe option. Let's wait and see the impact in next year's financials. 9b in debt @ about 7.5%. “We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Member Joined: 9/2/2006 Posts: 121
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Scubidu,
I knew the bond would be oversubscribed...and a greater portion of investors would prefer the "fixed" bond and not the "floating" bond. I was expecting a greater portion of investors to take up the fixed portion like it was the case with CfC Stanbic.
Maybe they thought that they could earn a higher interest rate than the fixed bond...which I doubt it will happen due to the excess liquidity in the market. This is probably the new "normal" in our fixed income market right.
Out of curiosity, would you like for us to have more discussions about HF in mwanahisa's forum? We could also try to figure out the impact of this bond on the company.
That way we all try to figure out if there is something to worry (or not worry) about the company...regardless of whether one would prefer to invest in that bond or in shares.
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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@scooby. Which one? http://www.wazua.com/for...spx?g=posts&m=24232
or http://www.wazua.co.ke/f...spx?g=posts&m=111676“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Member Joined: 9/2/2006 Posts: 121
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Scubidu,
Am taking about the second forum...thanks for finding the link.
Cheers
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Effective duration and Convexity of bonds
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