HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11260
Location: Los Angeles, California
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 Posted: Tue Nov 11, 2008 12:16 pm Post subject: Convertible Bond Funds |
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Lack of liquidity and the diminished ability to short is hampering the convertible bond market:
http://www.guardian.co.uk/business/feedarticle/8008405
| Quote: | "You can buy a convertible right now on a 25 percent discount to the same bond issued by the same company," Emmanuel Roman of GLG Partners, one of Europe's biggest hedge funds, told a recent conference.
"You get a 25 percent discount plus a call option. That doesn't make any sense," he said.
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The Hynix Semiconductor convertible, maturing in 2012, for example, traded at a 100 percent annual yield calculated on a basis of exercising the put option on the bond in June 2010. The bonds have since risen, but are still representing a yield to put of 88 percent.
By comparison, Hynix's corp bonds maturing in June 2017 are trading at around a 28 percent yield.
Tata Steel's 2012 convertible is trading 1,065 basis points above Standard Chartered's five year CDS. The two could normally be expected to trade in line because StanChart is backing Tata's bond. |
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