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Bond of the Week: 27 September 2013

GE Capital 6.75% 2018


This week we are taking a look at potential over priced low yielding bonds with a view to switching out into lower priced higher yielding issues with a longer maturing date.

Having a quick scan through our bonds in the ORB universe and sorting by yield there are many bonds with rates below 2% with short maturity dates and trading below 110.  However, trading way up at 118  with still nearly five years left the GE 6.75% bond offers a yield of 2.61% as of yesterdays close.  Today’s price is small up  @ 118.669 (up 0.071), in-line with the FTSE ORB index which is also having another positive day up 0.11 at 104.51 (prices correct as of 11am today). The bond itself does closely track the index although the recent uptick is lagging…

Bond information:

Issuer: GE Capital UK Funding
ISIN: XS0381559979
Coupon: 6.75%
Guarantor: General Electric Capital Corporation
Principle amount: £450m
Minimum denomination: £1k
First traded: July 2008
Maturity: August 2018
SP rating: AA+
Moody’s rating: A1

Compared to banking bonds of similar and longer maturity tradable on ORB it remains the top rated with only HSBC 6.5% XS0088317853 and 5.375%  XS0174470764 having A ratings.  It is also one of the highest priced bonds among peers with other bonds priced above 120.  Of the two HSBC bonds, the 6.5% seems to be lagging the market.

The GE Capital bond is currently rallying from an oversold position (note the low level of the RSI recently).  Support has been encountered near the previous reaction low just above 117. 

There is potential resistance nearby, however, from the 50-day moving average.  If that line, which is near the 119 region, can be overcome, the next chart target is along 120 (close to the longer-term MA line).  The chart shows a multi-month top formation above that figure.


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