And finally FR1, in response to your
Message 15331666
specifically,
<<on high yield Euro bond fund …>>
Merrill and thus probably all full service brokers, along with probably with Fidelity etc have single purpose Euro high yield bond funds, and also Asian high yield funds. Yield right now indicated about 10% for the Euro stuff and 12% for the Asian stuff, many holdings are actually denominated in US dollars (thus no direct currency risk). Yen loan at really negligible rate, enabling a positive 7-8% carry. The borrower of Yen is of course cheering the Japanese retirees to endure a bit longer of getting zerodotzeroodd percentage return on their savings so that we can live better driving Lexus SUVs, eating sushi, tap Sony computers, snicker about Japan and being sanctimonious about what is wrong with their previously feared system.
I have also held some individual US dollar denominated bonds for a while, bought at the depth of the Asian Crisis, at a level yielding 12-18%. Crisis makes some folks feel energized. The world is not an oyster; it is a gigantic refrigerator, cold but with plenty to feed on.
All full service brokers (US ones as well) and most banks in Hong Kong make foreign currency loans, and this may also be true in the US (not certain on this point).
I am not going full hog and piggy over this carry trade because of the clear and present danger of inflation, rise in yield, and thus tanking of the bond holdings capital value; the murkier danger of Japanese pulling a rabbit out of the hat and manage to recover economically; and the uncertain danger of US/Europe going the way of historic Italy and Brazil. One just never know and always better to hedge a bit and be able to afford being wrong than always needing to be right.
Chugs, Jay |
