bigfoot12
Member of DD Central
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Post by bigfoot12 on Nov 3, 2016 9:23:03 GMT
Is Virgin media risk at 5.7% YTM less risky than an entire portfolio at some of the main P2P platforms in your opinion? No. I am struggling to get the details from wise alpha site, but it looks like a 13 year fixed rate bond. It isn't hard to imagine scenarios which have 10 year gilts rising by 300bp over the next two years. The mark to market of this bond would probably be down more than 30% from here. The mark to market on most portfolios of 3- 5 year amortising loans might be less than 5%.
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Post by Wisealpha on Nov 3, 2016 11:02:32 GMT
WiseAlpha.Is there really a 5 year "lock-in" on investments via your platform? Cant see how that can be ( if it does) when you have created a SM Hi webbski9, No, there isn't a five year lock-in on investments. We do say however that there is no liquid secondary market at present which is why you may have interpreted it that way (most of the names on our site mature within 5 years). If you send us a quick email to investing@wisealpha with your username we can switch on the sell function for you. If you think about it most P2P platforms have taken a little while to get their secondary market up and running. We have it developed, just waiting to release it once we have a few more names on the site (most people have only been invested for a few months so we haven't seen anyone want to sell yet unless we have asked them to because we have run out of a particular name and would like them to switch). Kind regards,
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Post by Wisealpha on Nov 3, 2016 11:05:49 GMT
...I am struggling to get the details from wise alpha site, but it looks like a 13 year fixed rate bond. ... Agreed. After the "pizza express" bond reveal, I find it difficult to buy in to WA because I don't believe I would know exactly what I was buying. I think WA should provide the ISIN or similar so that the investment can be 100% independently identified. I find it strange that it is missing. Hi Paul, That shouldn't be a problem - we'll update the ISIN's on the site shortly. The feedback is good, obviously we want to perfect the site going forward so things like this that investors want we can add. Kind regards,
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Post by Wisealpha on Nov 3, 2016 11:39:26 GMT
Is Virgin media risk at 5.7% YTM less risky than an entire portfolio at some of the main P2P platforms in your opinion? No. I am struggling to get the details from wise alpha site, but it looks like a 13 year fixed rate bond. It isn't hard to imagine scenarios which have 10 year gilts rising by 300bp over the next two years. The mark to market of this bond would probably be down more than 30% from here. The mark to market on most portfolios of 3- 5 year amortising loans might be less than 5%. Hi bigfoot, It's true longer duration (i.e. longer dated maturities) bonds have more risk from perceived movements in spread differentials versus government securities. However, there are other factors to consider that mean there isn't the simple relationship you suggest i.e. where if 10 year gilts rise 300bps the price of something like VM would have to drop to give 300bps more in yield (in actual fact if investors required an extra 3% in yield in VM because 10 year gilts rose next year the price would need to drop around 20% in one year's time). Other factors for example are: - This asset class is heavily invested in by institutions with a specific mandate to invest in the asset class and these types of bonds. So even if govvie yields rose they would still want to remain invested rather than choosing to sell and buy govvies at a lower yield (even though the risk-reward spread had narrowed). Therefore there isn't a perfect relationship at any moment in time between the spread of government securities versus corporate risk securities but more just a directional relationship. Other factors like the supply of bonds in the market at the time, general investor sentiment in financial markets are also important. In boom times sometimes the difference in yield between corporate and government risk is actually very tight. The other thing to point out is that 'retail corporate bonds' rather than wholesale corporate bonds (the ones we focus on) are actually much longer in duration. You'll notice many of them have very long dated maturities. Also do I think that government bond yields will rise that much in one year - can't see it. Not to say it wouldn't happen but with gov yields having flirted with negative yields recently there would have to be some really big shifts in the economy and financial markets for that to occur. In any case our secondary market should fingers crossed be fully deployed soon so if some people do think inflation may sky rocket (even though the BoE follows an inflation targeting policy) or gov yields might rise substantially there will be a potential avenue to exit.
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Post by Wisealpha on Nov 3, 2016 11:42:54 GMT
WiseAlpha. Please "turn on" the SM button for me please. When trading on the SM can one deal in amounts smaller than 100 pounds ? And can one sell parts of owned loans i.e. sell 50 pounds of a 100 pound owned loan part? Regards webbski9 Hi webbski9, forgot to answer that one - the minimum investment is £100 per loan or bond. Yes, you can sell in denominations of a penny.
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Post by webbski9 on Nov 3, 2016 18:26:17 GMT
Many Thanks for your swift and helpful reply.Good communications.
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Post by webbski9 on Nov 3, 2016 18:28:19 GMT
forgot to say ...so,if i can sell in pennies,it follows I can buy those tiny amounts I guess?
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Post by Wisealpha on Nov 3, 2016 22:48:51 GMT
Hi webbski9,
Once you've purchased the minimum £100 you can then buy and sell in pennies in the same name.
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Post by webbski9 on Nov 4, 2016 4:25:52 GMT
Thanks.To be clear..once I have invested the minimum ,I can then buy/sell smaller amounts in any available loan ? Regards
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Post by Wisealpha on Nov 4, 2016 10:15:54 GMT
Hi Webbski9 - once you have bought the minimum on a particular loan or bond you can then buys and sell only in that particular loan or bond in denominations of a penny. Not in any loan or bond.
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Post by webbski9 on Nov 4, 2016 21:04:24 GMT
Ah,so thats not a true SM then.All other ( I believe ) p2p sites that host a SM allow customers to buy/ sell any bond/ loan on offer.Surely thats what a SM is all about ?
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jaswells
Member of DD Central
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Post by jaswells on Nov 4, 2016 22:34:52 GMT
As far as I understand the SM will run alongside the PM in its first phase of development. So indeed you would be able to buy any bond listed on the platform or put up for sale any you hold.
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kaya
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Post by kaya on Nov 18, 2016 15:30:05 GMT
Hi Guys, We think our platform has the potential to become a leading lending marketplace for investors given the focus on long established businesses and secured lending. I would tend to agree with this, the potential is there. For dummies like me who are new to this whole sector, it would be helpful to gain a better understanding of the basics. Obviously the bond prices fluctuate over time - what factors influence this? Is it simple supply and demand? Current prices range quite a lot from par, presently about 95-107% on current offerings. Do some offer better value than others then, regarding this? If the price is less/more than par, who is losing and gaining on these transactions. The banks?
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Post by Wisealpha on Nov 18, 2016 16:38:20 GMT
Hi Kaya,
The prices vary from par (100) according to a number of reasons:
- Market sentiment - Investors feel they require a lower or higher yield (rate of return) for the risk of lending to the company. - Performance of the company - Movements in supply/demand - Changes in interest rates, government bond yields and inflation - Other technical reasons e.g. a large seller or buyer
While the price can fluctuate that doesn't affect the amount of coupon the company pays - ultimately whoever is holding the bond can either make a paper gain or loss on the price while they are holding it. Once the bond matures everyone receives back par (100) so price movements along the way only affect investors if they sell and crystallize a gain or loss at that particular time. There are instances where the company can repay the bonds before maturity and there will typically be a schedule of prices (above par) that it will have to pay bondholders.
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kaya
Member of DD Central
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Post by kaya on Nov 19, 2016 14:13:08 GMT
Ok thanks, so the price of the bonds today will usually be lesser or greater than when issued. To take the example of the highest priced bond currently offered, if I wanted to buy £100 worth of a Bakk***r bond today, it would cost £107, so I am effectively paying a premium that will reduce my Yield to Maturity from 8.75% to 6.6%, is that correct? So it is much the same as buying a loan-part at a premium at Funding Circle say, yes? If I kept the bond note for a year, and then managed to sell it at the same price - with a 7% premium - then my annual yield figure, my return, would be 8.3%, is that correct? Or maybe that is not correct. If I later sell my bond note at par, will the buyer be paying the same price as I paid? That is, does the WiseApha secondary market effectively become a market that is quite independant of the outside market?
Meanwhile, the general market price could increase or decrease. Would a buyer of my bond note in one year's time have access to that market price? i.e. would the current open-market price be listed alongside my offer to sell? Would it be relevant?
Seperate question: Does it take an expert to forecast whether the price of such bonds are likely to vary much over the next year? Do traders gamble on such changes?
And finally: What annual percentage will Bakk***r actually be paying for their loan?
Apologies if I am confusing things even more...
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