Investment Q&A

Q: I am not familiar with fixed income investments. I am looking at investing 30k in fixed income . Your portfolios show investments in CVD, CPB, and XHY. Looking for best optimization of rising rate environment and falling bond prices in the future. Just going through your question answer background material , I find VGRO, ICVT, and CSU.DB, very interesting. What would be the best combination in addition to any suggestions you may have. Thank you for your valuable guidance and a great job 5i is doing.

Q: hello 5i:
Many moons ago, we bought CSU.DB as a fixed income part of the portfolio for its (large) interest rate over prevailing rates at the time. All that was expected was a steady, relatively safe interest payment. The fact we've now got a very good capital gain as well, is a real bonus.
So, the question: is there a debt instrument, currently, that you would put in the same class as CSU.DB, that still has decent liquidity?
thanks
Paul L

Q: Hi - I'm trying to beef up the fixed income side of my portfolio and non-convertible debentures such as the ones above look like a very interesting alternative to bonds. Their yields are >5.5% and CSU.DB even adjusts its distribution for inflation each year. What am I missing here? It seems like people should be all over these, but their prices don't reflect that.

Q: 1. With reference to the likelihood of interest rate increase (and increase in inflation rates) over the next 3 years, are these factors such that they are more likely than not to depress the value of CSU.db?
2. Do you rate these debentures reasonably safe given general business conditions faced by CSU in the next 3 years? I do not know what sources are reliable to check ANY issuer’s credit worthiness.
3. If you had a largish amount ( 8% of a portfolio that has no other fixed income) would you trim the holding? If yes, what would be your suggestions to buy in lieu of CSU.db? I am hard-pressed to find other securities that would be equivalent in the current TINA world.

Q: CSU.DB:CA : fell almost 5% this morning, albeit on low volume. trivial . Such a drop is extremely unusual for this security. I do not follow Canadian markets and am wondering if this price drop is consistent with price changes in other similar interest sensitive securities this morning. Are you aware of any reason for such a drop? (I am restricted from CSU and SHOP common but have a large position in the debentures)

Q: I purchased these when issued at $115. In a way, CSU used the high issue price to pay the first 3 years of interest payments. I purchased these as part of my bond portion, and had intended to keep this until my end.

For CSU, this interest must be expensive. Given that they released the debentures at a 15% premium, would calling it back be viewed as bad faith?
There is some capital appreciation, should I capture this and flip into a bond etf?

Q: could you give me more details about how these debentures work?
with a price around 129 $, what is the current yield?
Are they trading is US or CAD ?
I understand that at the end of march of each year the company can announce that they redeem them in a 5 year period. Hypothetically, lets say I buy them today at 129$ and on March 31th 2020 they announce the will rebuy them (at par, so @100$ ) in march 2025. What would be the reaction of the market on the next day. Would the price slowly goes down on a 5 year period ?
What influence the debenture price ? (how CSU is going, interest rate, something else)?
I also have 5 % in my portfolio in CSU, if I had debentures up to 5 %, would you see that as a concentration risk ?
Would you have a few similar products to suggest in other quality companies ?

Q: Hi, what do you think of this security for its income potential and safety? Thanks!