Q: Hi 5i,
I have some Exchange Income series G debentures, which were purchased at a discount to par and are now trading above par. Also, the EIF share price has just nudged up through the debentures’ conversion price. The issue does not mature until 2021 and the 6% coupon is still yielding over 5.5% at the debentures’ recent trading price, a better yield than any fixed income alternatives I have in mind right now. I purchased the debentures primarily to increase my overall fixed income yield and secondarily because I thought they also had some capital appreciation upside. They are held within my RSP so, whatever I do with them, there would be no immediate tax consequence. What I am looking for is a little help with the thought process on whether the unrealized capital gain and the move up through the conversion price suggests that I ought to be taking any action, or whether I should just continue to hold them for their bond qualities. Are there any rules of thumb in these circumstances with this kind of investment vehicle? The increase in value of the debentures is not enough to have substantially altered the balance between fixed income and equities within the RSP. So I wouldn’t need to trim them based on rebalancing the fixed income/equities mix alone. My overall investment time horizon extends well beyond their maturity date. Thanks for any thoughts.
I have some Exchange Income series G debentures, which were purchased at a discount to par and are now trading above par. Also, the EIF share price has just nudged up through the debentures’ conversion price. The issue does not mature until 2021 and the 6% coupon is still yielding over 5.5% at the debentures’ recent trading price, a better yield than any fixed income alternatives I have in mind right now. I purchased the debentures primarily to increase my overall fixed income yield and secondarily because I thought they also had some capital appreciation upside. They are held within my RSP so, whatever I do with them, there would be no immediate tax consequence. What I am looking for is a little help with the thought process on whether the unrealized capital gain and the move up through the conversion price suggests that I ought to be taking any action, or whether I should just continue to hold them for their bond qualities. Are there any rules of thumb in these circumstances with this kind of investment vehicle? The increase in value of the debentures is not enough to have substantially altered the balance between fixed income and equities within the RSP. So I wouldn’t need to trim them based on rebalancing the fixed income/equities mix alone. My overall investment time horizon extends well beyond their maturity date. Thanks for any thoughts.
