Saturday, February 2, 2013

Newbie's bond portfolio - Trade #10

I sold 3,590 shares of ING 7.375% USD Perpetual Capital Securities (Ticker: IDG) as my tenth trade.

At a client price of 25.35, I managed to liquidate at a small profit of USD1,077.

The reasons for selling this Perpetual at this point in time are as follows:
1. The 10 year UST has been rising in terms of yield (price gone down). This does not bode well for long dated bonds, particularly those with no coupon reset features. ING 7.375% is fixed for life with no reset features.
2. I had entered into this Perpetual mainly to utilise my initial USD cash. I did not want to leave cash idle and saw this as a vehicle to park my USD cash since I managed to purchase this Perpetual at par.
3. I was actually quite surprised to see this 7.375% fixed for life perpetual still above par with many better perpetuals recently having declined 2-4% in price. Hence, I feel that this Perpetual is overvalued and the price is likely to decline in the near future.
4. This sale frees up surplus collateral margin in order for me to buy into other better perpetuals whose prices I have been closely monitoring.
5. This is a split junk/investment grade rated Perpetual. My goal is to only have investment grade securities in my leveraged bond portfolio.

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