Analysis & Comment  > Bond of the Week

Share |
Back to 2013

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.

 

Disclaimer

www.fixedincomeinvestor.co.uk is a division of Stockcube Research Ltd which is authorised and regulated by the Financial Services Authority. The research provided by Stockcube on the Website (and any other Stockcube website) is provided solely to enable investors to make their own investment decisions and does not constitute personal investment recommendations. No recommendations are made directly or indirectly by Stockcube as to the merits or suitability of any investment decision or transaction which may result directly or indirectly from having viewed the investment research on the Website or having received it by email. Investors are therefore urged to seek independent financial advice if they are in any doubt. The value of investments and the income derived from them can go down as well as up, and the investor may not get back the full amount originally invested.

Bonds, as with all investments, are subject to price volatility and in the event of a default an investor may lose some or all of his or her original investment. This site also contains references to derivatives. These are particularly high risk, high reward investment instruments and an investor may lose more than his initial margin requirement. Some foreign currency instruments are also featured and if an investor decides to acquire any investment denominated in a currency different from the his or her own,  the investor should note that changes in foreign exchange rates may have an adverse effect on the value, price and income of the investment in the base currency.

None of the services provided as a result of this agreement constitutes a personal recommendation to invest from Stockcube and no service should be construed as such.  For the avoidance of doubt, where the word “recommendation” is used elsewhere in these terms it does not refer to a personal recommendation, unless this is explicitly stated.  The investments described by or in the services are not suitable for all investors. Investors  who have any doubt about whether particular investments are suitable for them should contact an independent financial adviser.

These services do not include personal investment recommendations from Stockcube and should not be construed as such. Stockcube may, at its discretion, provide information, advice, recommendations and research to subscribers from time to time on its own initiative or advise subscribers of other services available. Stockcube will be under no obligation to provide on-going advice in relation to financial instruments covered on this website.