Rob: Sorry for the delay..I was busy this past weekend. I will quote you the following piece from Forbes (dec.30.96). "...yeilds on the CDN long bond should fall from the current 7% to 6.6% by next Dec(97), according to Kania (a Lehman Brothers sovereign debt analyst). During that time, the CDN dollar-now around .74 (US)- should climb to around .78 (US). The bonds trade at a 111.97 current yeild 7%. Kania thinks they'll rise to $118.55 by the end of 1997. A currency ralley could bring total returns to 18.7% without reinvesting the coupon. The equivalent 30-year US Treasury held for a year would earn 6.5%."
Now then, I assume by the MSE you mean the Montreal Stock Exchange. Hate to sound like a stupido..but then I'm not in Canada until next July. I enjoy playing the US bond market, but I really don't know a thing about the cdn bond market. The only way I know to play this is buying Call options in the currency (which I have initiated last Thursday), or to buy the contract itself. Having taken serious baths in the currency markets in the past, I am quite sanguine about something as speculative as options. More my speed.
That said....I like CDN calls (priced)as tight in as you can afford them. I like to spread these calls out over several months, packing most of the capital into August or beyond. I lost a good bit of $$ betting on the CDN last year, at all the wrong times. But I do believe it will take a sharp up turn, yet this year....and that options on currencies are the best -long term-way to go. Playing puts on the CDN bond is out of my league. Playing serious contracts on the currency directly...are ....well...been there done that and done it all wrong. Let me get my legs back first.
Your thinking, to my way of thinking, is on target, nonetheless. But then remember, you're talking to an American who is moving to Canada...who has invested a serious amount of money in land and ...soon to-be-housing. And I've never seen the place without snow on its surface. |
