Commercial bond market to open up

Many financial experts are full of optimism about the growth rate of the commercial bond market that should provide a boom for Vietnamese businesses in the near future.

According to Truong Hung Long, Deputy Director of the Finance and Banking Department under the Finance Ministry, the commercial bond market is on the cusp of huge gains.

The department’s director Pham Phan Dung said that Vietnamese businesses have an opportunity to expand their capital mobilisation both inside and outside the country through bond issuances.

According to the Finance Ministry, a legal framework has been made for businesses to issue bonds to the public. Both the Laws on Business and Securities, and Decree No. 52 holds regulations that create conditions for businesses to issue bonds for capital mobilisation.

Kicking off in 1994, it wasn’t until 2006 that the market showed signs that it may flourish. Decree No. 52 was issued last year to allow businesses to issue bonds separately. Under the decree, not only State-owned businesses but also private, joint stock and foreign-invested companies were permitted to issue bonds.

In 2006, local businesses raked in more than 8 trillion VND through bond issuances. Five trillion of which was scoffed up by the Electricity of Viet Nam (EVN), 800 billion VND by the Viet Nam Shipbuilding Industry Group (Vinashin) and 260 billion VND by the Song Da Corporation.

Close to 7 trillion VND worth of bonds were issued by local businesses over the first seven months of the year.

However, according to a representative from Citibank at a conference on the developing bond market in August, foreign investors are cautious of bonds issued by local businesses due to low confidence in domestic business transparency.

In order to issue bonds effectively, Dung proposed that Vietnamese businesses improve their business efficiency, competitive edge and make financial reports transparent to earn trust from investors.

Hisatsugu Furukawa, a consultant with the Japanese International Cooperation Agency (JICA), agreed with Dung that transparency on financial issues is the only way to earn investors’ trust.

In a bid to support bond issuance by local businesses, the Finance Ministry has hooked up with the Secretariat of the Association of Southeast Asian Nations (ASEAN) and the Japan-ASEAN Financial Technical Assistance Fund to draft business bond handbooks to supply essential information for local businesses to issue bonds abroad. They are scheduled to be released by the fourth quarter of this year.

Bond Market Collapse Worries Vermont Student-Loan Agency

Normally, this is a slow time of year for the Winooski-based Vermont Student Assistance Corp., which loans hundreds of millions of dollars annually to parents and students looking to finance higher education.

But the latest crisis on Wall Street has the state’s largest student lender scrambling to secure $190 million to meet the demand for loans it expects to make this fall.

The apparent collapse last month of the auction-rate securities market, which VSAC relies on to finance its lending, poses no threat to students who have already borrowed, said Scott Giles, the agency’s vice president of policy, planning and research. However, it has threatened the short-term financial viability of VSAC, which currently lacks nearly half of the $390 million it needs for the 2008-2009 school year.

“Auction-rate securities were, for a long time, the most efficient way to sell bonds, take the money and give it to students,” Giles said. “It’s not very efficient now, nor will it ever be again.”

Nor, like most things related to the municipal bond market, is it easy to explain. Here’s one way to think about it: The sub-prime mortgage debacle may have finally found its mark in Vermont.

Auction-rate securities, or ARS, are variable-rate, long-term bonds that allow investors the opportunity to cash out at will and collect short-term interest rates, which are reset at auction every seven to 35 days. While a lack of bidders could result in a failed auction, in the past, underwriters — Wall Street banks such as Goldman Sachs, Lehman Brothers and Merrill Lynch — would submit a “clearing bid” to complete the auction and provide liquidity to bond holders.

The problems in the market peaked in mid-February when major underwriters refused to bid, instead allowing hundreds of bond auctions to fail. That kicked in a penalty, known as the “fail rate,” that increased — in some cases by more than double — the interest costs for bond issuers such as VSAC.

As a result, Giles said, VSAC is paying close to 1 percent more in interest on the nearly $2 billion in auction-rate securities in its portfolio. If the agency doesn’t refinance the bonds, the failure of the ARS market could cost VSAC $20 million. Giles said VSAC “has the ability to cover” the additional costs should it fail to secure re-financing before the end of the year. Likewise, because students continue to pay on existing loans, the agency has the resources to continue operations for the foreseeable future.

“We are prepared to draw upon our reserves to make sure Vermont students have access to student loans,” he said.

Giles’ optimism is in contrast to that of much larger student-loan agencies in Pennsylvania and Michigan, which have announced they will eliminate some student-loan programs or stop lending altogether for the time being. The problem in those states, Giles said, is the growing number of non-guaranteed private loans, which under current market conditions are a risky investment. (Private loans make up a small part of VSAC’s portfolio, about $54 million in 2007, down from $86 million in 2006.)

Just about everyone, including Giles, blames the collapse of the sub-prime mortgage market for declining confidence in the auction-rate securities market. The failure of bond-rating agencies and insurance companies to ascribe an appropriate level of risk to securities fashioned from billions of dollars in bad loans has spooked investors from the broader bond market.

Giles believes investors’ fears are “irrational,” especially when it comes to student loans, which are 97 percent guaranteed by the federal government. Moreover, he said, VSAC has the fourth lowest student-loan default rate in the country, making the agency’s loans a more attractive investment than those of less credit-worthy issuers.

“We actually believe the market will settle out,” Giles said. “At some point, people will start moving back into quality assets.”

Until then, VSAC is considering refinancing its bond portfolio with something called a variable-rate demand obligation. A VRDO, as it is known, is similar to an auction-rate security in that it would allow VSAC to borrow long-term while offering investors short-term interest rates.

Thomas Melloni, an attorney with the Burlington firm Burak Anderson & Melloni, said interest rates for a VRDO are set daily and weekly, and the “demand” function allows bondholders to cash out when they like. Unlike auction-rated securities, however, a VRDO requires a letter of credit from a bank or financial institution that agrees to meet the bondholders’ demand.

Vermont Treasurer Jeb Spaulding said officials are also exploring the possibility that the state pension fund “could play some role” in helping refinance some of VSAC’s existing debt. “There’s no way of knowing at this point whether that’s even possible,” Spaulding said. “First of all, that’s a board decision, and it will take a lot of due diligence.”

Indeed, timing could be VSAC’s largest hurdle at this point. Across the country, local governments and quasi-public agencies like hospitals and housing-finance and student-loan corporations that rely on auction-rate securities are desperately seeking ways to refinance more than $350 billion in total debt.

“Everyone is trying to do it at once,” Spaulding said, “and there is only so much capital out there.”

Under normal conditions, VSAC would wait another couple months to secure financing for the loans it will offer in the fall; that way, VSAC wouldn’t be paying interest to investors who are backing the loans before the loans themselves started earning revenue for the agency. Giles said VSAC has begun talking to various financial institutions about lines of credit to support re-financing through VRDOs.

Giles allowed that, should VSAC fail to refinance its bond debt, the federal government might have to step in. VSAC is the “lender of last resort” for the state of Vermont, meaning the feds would loan money directly to the agency should the crisis reach epic proportions.

Giles said that kind of action would lead to “complications that people will want to avoid.” However, he doesn’t believe it will come to that.

“This is a serious situation,” he said, “but one thing we don’t want to do is to create a sense of panic.”

Different Types of Mutual Funds

Everyone claims to have the best mutual funds out there on the market. In fact, deciding what mutual funds to go with can be a daunting task to a new investor who has decided to take the plunge. However, determining where the best mutual funds really can be found is not very difficult. It just requires a little research.

If you're looking for the best mutual funds, one of the first things you want to look for is annual return. Mutual fund companies will often tout their annual returns as proof that their product is superior. Take it into consideration. Then move on.

Choosing the best mutual funds means examining the expense ratio of any given investment. This is probably the single most important factor you'll want to take into consideration before you make a decision. Net Asset Values, which are calculated and published daily, are also crucial to separating the best mutual funds from the impostors.

Mutual funds can't claim to be the best if they don't offer favourable turnover ratios, something that will be very important to you as an investor if you are looking at having a taxable account. Examining a mutual fund's fund prospectus is also crucial. Remember that companies are required to share this information with you before you invest.

Once you have understood and examined all these different aspects, choosing the best mutual funds out there suddenly won't seem like such guesswork. In fact, choosing the best mutual funds will have gotten a whole lot easier.

Bond investing. Information on investing in bonds.

Bond investing in today's market does not have to be the safe sane alternative it used to be. Bond investing today does not need to be relegated to the amateurs and safe haven seekers of the world. In fact bond investing can be very tricky and financially rewarding.

One of the best aspects of bond investing, besides profit of course, is the feeling that comes with bond investing. Bond investing is not about profit today, gone tomorrow. No bond investing is about building something for our town, community and world.

Bond investing is about being invested in the community as a whole. If that does not drive your forward, then maybe you should consider another aspect to bond investing. Maybe you should consider bond investing is one of the safer investment choices in today's topsy-turvy make it all or nothing marketplace.

No, for peace of mind and quality investing we must sincerely and honestly take a deep and long look at the world of bond investing. Sometimes it's nice to have money. But some sometimes it's good to feel good about your money and making profit. With bond investing you can surely accomplish this. So next time you are thinking about putting your money somewhere safe and yet still earning a nice profit, look into bond investing and see why it can be so very rewarding.

Bond Pricing. Information on the pricing of bonds.In the fast paced financial world of today, bond pricing may seem undervalued and even staid.

In the fast paced financial world of today, bond pricing may seem undervalued and even staid. But for millions of successful investors, bond pricing has been one of the more stable and yes, even lucrative forms of profitable financial investment available. What is fair market value and what does it have to do with bond pricing. Well fair market value basically mean that this is the price of unit 'x' and this is what the market, or those that profit on the exchange of 'x' would pay for 'x'. With respect to bond pricing this rationale sometimes goes straight out the door and this could account why there might be a stigma attached to bonds. But there should not be any stigma or ignorance attached to bond pricing.

In fact here is why bond pricing is so undervalued and here is why you can make big profits by considering your approach to bond pricing. Ready, here it is: No one can see the future. Plain and simple. So, if no one can see the future then no one truly knows how that bond will perform. And this is where your come in, by taking a look at attractive bond pricing, and attractive bond pricing means whatever it means to you as an investor, but by taking a look at the most appealing bond pricing available you, through due diligence can often scoop up large amounts of undervalued bonds. Then patiently wait for the bond to nature past the bond pricing and voila! Profit. So the question is this, how do you feel about bond pricing?

Bond rating. We answer the question, what is a bond rating?

Why even bother with bond rating? I mean the investment is either a dog or a bird. It either hunts or it does not. So why do people even allow themselves to be influenced, or to make their investing choices, due to bond rating. Well first off whether you are going to invest or not has nothing to do with bond rating.

A low bond rating might mean a whole lot of things. A bond rating might indicate a good performer, or an undervalued diamond in the rough. It might mean disaster and it might mean perils before swine. But what ever that bond rating means, it means this and this is what is most important to you; a bond rating indicates the value as perceived by the investing community.

Now, how does bond rating affect you? In times of both economic peril and abundance, we are always looking for the next big thing. Sometimes an undervalued bond rating might just be that next big thing. But it is up to you to determine what bond rating means to you and how you want bond rating to influence your investing decisions. So, the question is really this, how does bond rating affect your decision to invest?

Bond yields. Information on bond yields.Bond Yields are something that sometimes causes the old hand investor to groan. All the patience, all the wait

Bond Yields are something that sometimes causes the old hand investor to groan. All the patience, all the waiting all the time. I mean, let us face the facts, are there any big kills in the world of bond yields? Well, what if I told you that is not the point of bond yields. And furthermore what if told you bond yields were more like big game hunting than you could imagine? Well bond yields have all the excitement and challenge of everyday heads up-what is hot at the market- investing, in fact there challenge in bond yields and the investing strategy that goes along with them.

You see the thing with bond yields is that you are not gambling on the here and now. No instead you are looking for bond yields to turn a profit at some future date. Bond yields ask you to make a commitment to the investment that average, everyday turn a profit deals miss out on. And the great thing is, bond yields usually require a lower investment and less risk.

There is still big time profit to be had in the world of bond yields, but there is safety, and just lie a hunter waiting in the blind, you must be patient and committed to the investment, otherwise there will be no kill and no profit. So remember that next time you are balking at the long term investment strategy that bond yields offer, remember that it takes all the skills of a patient hunter to make the kill in the world of Big Game bond yields.

Calculate bond interest. Information on calculating bond interest.

The number one reason to calculate bond interest is to determine at what point our bond has achieved maturity and what that means to you financially. From gauging the yield top speculating on the future, to calculate bond interest is to know the state of your flocks. And knowing the state of your flocks, or to calculate bond interest is the mark of a prudent and wise investor.

If you are just waiting for a whole bunch of profit to show up one day, then you just might be waiting a long time. The way to profit, and especially in the world of bonds is to learn how to calculate bond interest. This is where your solid good money is going to made.

So next time so big shot investor sneers, either in conversation, or across the aisle on the A train, remember that a great way to have the last laugh is to calculate bond interest. This the way to happy, safe, solid investing that you can be satisfied with.

In closing it cannot be said enough, that you as an investor must learn how to calculate bond interest. This is the fast track to successful, satisfied and yes, savvy investing. The ability to calculate bond interest separates the winners from the losers, the rich from the failed. And finally, the one thing you should remember about the ability to calculate bond interest, it that it is a wise practice.