November 27, 2013 Comments

On Wednesday the S&P 500 was up 0.25% and Toronto was up 0.1%.

Most of our stocks picks were up and there were no particularly large moves in either direction.

This morning I received an email with a press release indicating that Tim Hortons was selling $450 million of ten year bonds yielding 4.52%.

I’ve generally not been interested in long term bonds. On the other hand 10 years is perhaps not so very long and the yield looked attractive compared to the ten year government bond yield which is at 2.62%. A spread of almost 2% looked tempting.

I figured maybe I could put some of my idle cash into this. The idea would be to most likely hold until maturity. Or in the spread (the premium over the government bond yield) decreased I could possibly get a capital gain on the bond.

If interest rates rise, the market value of the bond would fall but the risk of a big increase in interest rates seems to be becoming more remote and in any case I would not have to sell at the loss as I could hold until maturity.

TD Securities was listed as being involved in selling these.

But when I called TD Direct Investing, they said they had no bonds to sell to me. Now, it was a private placement so that might explain it. TD Direct Investing suggested that TD Bank was buying the bonds for its own account or for institutional investors.

I emailed Tim Hortons and they said that accredited investors were eligible to buy. But the issue was already over-subscribed (sold out) in any case.

I suspect full service brokerage clients of TD Securities may have been able to get some of these bonds but not the discount broker clients.

It was interesting to learn a little about this because at some point I will likely want to buy some bonds.

The fact that I could not buy any seems to make the bonds all the more attractive of course.

I may try to get registered as an accredited investor with TD although it may be that as a discount broker client I move not be able to access accredited-investor-only products in any case.

In other news, I note that the Canadian dollar has been falling. This increases the Canadian dollar value of our U.S. investments which is nice added boost. I have no idea how low the Canadian dollar will go but at some point (maybe 93 cents) I would move some U.S. cash back to Canadian dollars and then hope to reverse that if the Canadian dollar rose. In the longer term movements in the Canadian dollar against the American have not been that important. (Consider that a 10 cents move after ten years would only amount to 1% per year, so not that big a deal for investors.