Our valued sponsor

Buy high yield Emerging Market country bond and hedge back to USD?? Is it possible?

troubled soul

troubled soul

Pro Member
Aug 23, 2020
2,734
1,862
113
#1
Register now
You must login or register to view hidden content on this page.
In today crazy high Market. It is better to buy fixed income rather than Overvalued stock.
I have Idea. Just buy any high yield Emerging Market country bond and Hedge back using USD.

Like Brazil Government Bond yield 11.0200%. If I buy one and Hedge back to USD. By doing this you get 11.0200% minus whatever the hedging fee/commission .Keep in mind that you get this Return on USD. Is it possible? Or Am I missing something?.
How to do this?
Is any bank or financial Institute provide this type of service?
or Even Is it good Idea???

@Martin Everson

As A bond investor do you try this type of setup?
Can you put some light on this Idea? Possibility ? which Banks???

Thanks
 
  • Like
Reactions: clemens
#2
azb1 said:
In today crazy high Market. It is better to buy fixed income rather than Overvalued stock.
I have Idea. Just buy any high yield Emerging Market country bond and Hedge back using USD.

Like Brazil Government Bond yield 11.0200%. If I buy one and Hedge back to USD. By doing this you get 11.0200% minus whatever the hedging fee/commission .Keep in mind that you get this Return on USD. Is it possible? Or Am I missing something?.
How to do this?
Is any bank or financial Institute provide this type of service?
or Even Is it good Idea???

@Martin Everson

As A bond investor do you try this type of setup?
Can you put some light on this Idea? Possibility ? which Banks???

Thanks
Click to expand...
I am not a bond investor, just to say.

You buy a real / usd hedge and ideally some default protection.
Also as nominal rates set to rise, they will have an impact on long duration bonds.
Even tho no real tightening will take place due to high inflation, but the interest rates rise somewhat.

You can also buy stocks in these same markets, and those are now very cheap compared to the high valuation tech stocks. Imo a better allocation than into debt instruments.
 
  • Like
Reactions: troubled soul
#3
Hedging costs will eat away a big portion of the yield (or all of it), usually these high yielding bonds are high yielding also because their currency has been falling against the USD for a long time.
There is a reason that high yield bonds are also known as "junk" bonds. Yields are high for a reason and it's the risk.

If you insist on doing this, the easiest solution is to find an ETF you like that is already hedged to USD:
https://etfdb.com/etfdb-category/high-yield-bonds/
Also I'm far from a bond pro but from what I understand the yield is only the yield if you hold the bond until fruition.

If you don't, you are also exposed to bond prices falling when you try to sell, which has been the case for a while now. Every time you read in the news "Bond yields rising" this means that the price of these bonds is falling.

Bottom line just buy some diversified total market ETF and don't do extremely risky things and risk total loss of capital. Don't forget that Brazil has already defaulted on its debts 10 times.
 
  • Like
Reactions: troubled soul
#5
azb1 said:
Like Brazil Government Bond yield 11.0200%. If I buy one and Hedge back to USD. By doing this you get 11.0200% minus whatever the hedging fee/commission .Keep in mind that you get this Return on USD. Is it possible?
Click to expand...

It is but hedging would be expensive. Get a quote and you will see what I mean. Also what are you hedging the interest payments or principle return? You would need to hedge both. And long dated hedges are uneconomical and so is short term hedging(bi-annually) and rolling over the hedge.

azb1 said:
Is any bank or financial Institute provide this type of service?
or Even Is it good Idea???
Click to expand...

Any private bank can but it would be suicide to do this.

azb1 said:
As A bond investor do you try this type of setup?
Click to expand...

Never ever. Last month I liquidated my entire bond portfolio.

azb1 said:
Can you put some light on this Idea? Possibility ? which Banks???
Click to expand...

If you want to speculate on junk bonds (High yield) then invest via a very diversified portfolio of HY Bonds. There are good funds paying dividends monthly and contain over 1000 different bonds across multiple jurisdictions. This lowers the chance of any single bond defaulting leading to huge loses. Like wise it reduces political risk.

azb1 said:
Like Brazil Government Bond yield 11.0200%.
Click to expand...

Inflation in Brazil is near on 11% so true return on bond is near 0% after accounting for inflation...lol. Also with a sovereign rating of BB- with S&P and Fitch with outlook negative its a risky play. You could look into CDS's for protection but again would be uneconomical to buy.
 
  • Like
Reactions: clemens and troubled soul
#7
azb1 said:
Where you invest money now?? Rather than bond, Really curious???
Click to expand...

I created the below thread to find ideas from people on where to put it. But I am almost certain it will go into hard tangible assets and no longer financial market instruments. I think I am done with paper assets for good due to political risks and ease of confiscation.

https://www.offshorecorptalk.com/th...-future-potential-sanctions.36646/post-205537
azb1 said:
If you are comfortable, Do you mind sharing with us?
Click to expand...

The money is now back in my trust currently as it awaits a new home in some new tangible assets cig-:,. I might just buy a private island with good elevation and develop it.

https://www.privateislandsonline.com/caribbean/bahamas/the-exumas/lumber-cay
 
  • Like
Reactions: clemens, joffreylol and troubled soul
#8
Martin Everson said:
I created the below thread to find ideas from people on where to put it. But I am almost certain it will go into hard tangible assets and no longer financial market instruments. I think I am done with paper assets for good due to political risks and ease of confiscation.

https://www.offshorecorptalk.com/th...-future-potential-sanctions.36646/post-205537


The money is now back in my trust currently as it awaits a new home in some new tangible assets cig-:,. I might just buy a private island with good elevation and develop it.

https://www.privateislandsonline.com/caribbean/bahamas/the-exumas/lumber-cay
Click to expand...

Good idea. It has to be far away and look like a lot of hard labour to keep the communists away from sacking it.
Or better, create your own sovereign island state ;)
 
#9
Martin Everson said:
I created the below thread to find ideas from people on where to put it. But I am almost certain it will go into hard tangible assets and no longer financial market instruments. I think I am done with paper assets for good due to political risks and ease of confiscation.

https://www.offshorecorptalk.com/th...-future-potential-sanctions.36646/post-205537


The money is now back in my trust currently as it awaits a new home in some new tangible assets cig-:,. I might just buy a private island with good elevation and develop it.

https://www.privateislandsonline.com/caribbean/bahamas/the-exumas/lumber-cay
Click to expand...
that's an inetersting website. If I had the money I would by such an Island... however, what about infrastructure, Internet, electricity and similar that is required to live on a island, how would you go about that?
 
#11
clemens said:
that's an inetersting website. If I had the money I would by such an Island... however, what about infrastructure, Internet, electricity and similar that is required to live on a island, how would you go about that?
Click to expand...

Developing it would not be cheap at all. Power is easy with a 50k to 100k solar array or wind turbines with battery banks. Internet would likely be satellite based. Then finally installation of a miniature desalination plant for fresh water and a dock for a small boats. The rest of cost is then buildings and construction. Ideal model would be to live part time and rent it out like Richard Branson's Necker island smi(&%.

https://www.virginlimitededition.com/en/necker-island

JackAlabama said:
You also need defense ideally a small army
Click to expand...

You would need some pet dogs......lol.


P.S This is all wishful thinking. The reality of developing an island would bankrupt me. Back to thread topic.
 
  • Like
Reactions: clemens and aage
#14
Martin Everson said:
Developing it would not be cheap at all. Power is easy with a 50k to 100k solar array or wind turbines with battery banks. Internet would likely be satellite based. Then finally installation of a miniature desalination plant for fresh water and a dock for a small boats. The rest of cost is then buildings and construction. Ideal model would be to live part time and rent it out like Richard Branson's Necker island smi(&%.
Click to expand...
not bad at all! nice idea.
 
#15
Martin Everson said:
Developing it would not be cheap at all. Power is easy with a 50k to 100k solar array or wind turbines with battery banks. Internet would likely be satellite based. Then finally installation of a miniature desalination plant for fresh water and a dock for a small boats. The rest of cost is then buildings and construction. Ideal model would be to live part time and rent it out like Richard Branson's Necker island smi(&%.
Click to expand...
it sounds like a straight forward process and easy, hope you will manage it, I will come and visit your island cig-:,
 
You must log in or register to reply here.
Offshore Bank Accounts

Forum Announcement

Latest Threads

Offshore Bank Accounts
Top Bottom
Back