Big Cash Flow And Over 11% Yields Indicated In This FX1 Yankee Bond Portfolio

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 |  Includes: BND, CEMB, PPP, TGS
by: Randy Durig

Presented below is our monthly summary of the 10 bonds that we have researched, recommended in reviews sent to our clients, and then published on Seeking Alpha over the last 3 months. At the end of October, the yields indicated when these securities were added to our FX1, FX2, and/or FX3 portfolios averaged 9.97%. Nine of these foreign corporation debt instruments were Yankee bonds, denominated in US dollars, and one was in Swedish kronor. Each paragraph details the coupon rate, maturity, CUSIP, credit rating, and the yields obtained at the time of acquisition for the FX1, FX2, or FX3 portfolios, as well as giving the business sector and a brief recap of the reason for its selection. Many of the companies hold prominent, dominant, or even monopolistic positioning within their respective countries, and it is not uncommon to find credit ratings that are constrained by a national sovereign credit rating. The following breakdown indicates which portfolio each issue was added to:

· 9 US dollar (Yankee) bonds were added to FX1 and FX2.

· 1 Swedish Krona bond was added to FX2 and FX3.

(View the FX1, FX2 & FX3 Portfolio's here.)

Overall, the 9 Yankee bonds added in the last 3 months have an average outstanding maturity of about 3.39 years and indicate an average net yield of over 11%, while all 10 bonds have an average of about 3.12 years remaining and an average net yield indication of about 9.475%. This is a slight improvement from last month's FX1 review.

14.38% Yields From Brigus Gold's 2½ Year Convertible Bonds
Issuer: Brigus Gold (BRD)
Coupon: 6.50%
Maturity: 3/31/2016
CUSIP:109490AA0
Ratings: NA
Price: 84.45 (10/31/13)
Yield to Maturity: 14.38%
Portfolios: FX1 and FX2
Gold Miner, Canada
We think the new bonanza grade assay results from directly below current mining operations at Black Fox significantly enhances the potential value of its in situ assets and may for allow easier access to additional capital from the equity markets should it be needed.
More Brigus Gold bond information: 14.38 % Yields Brigus Gold Convertibles

10.25% Yields From Transportadora de Gas Del Sur's Four Year Sinking Bonds
Issuer: Transportadora de Gas del Sur S.A (NYSE:TGS)
Coupon: 7.875%
Maturity: 5/14/2017
CUSIP: P9308RAX1
Ratings: B3/B-
Price: 95.465 (10/22/13)
Avg.Yield to Avg.(2 yr) Maturity: ~10.25%
Portfolios: FX1 and FX2
Natural Gas Pipeline Monopoly, South America
Recent strengthening and rise of Transportadora's stock price has greatly improved the metrics of its balance sheet and diminished the overall risks that we see in its bonds.
More TGS bond information: 10.5 % Yields Transportadora de Gas Del Sur's

7% Yield to First Call in July 2014, From Diamorph, in Swedish Krona
Issuer: Diamorph
Coupon: 12.00%
Maturity: 7/6/2017
CUSIP: P9308RAX1
Ratings: NA
Pays: Semi-annually
Price: 110.50 (10/22/13)
Yield to Maturity: ~8.6%
Yield to First Call 7/6/14: 7.0%
Portfolios: FX2 and FX3
Nanoteck Sweden
During the second quarter, a fully subscribed rights issue of 18 million shares was completed. At the end of June, 2013, total fixed assets were reported at SEK 707.4 million, with total assets being SEK 942 million.
More TGS bond information: 7% CTW Diamorph Swedish Krona

10.76 % Yields, Myria Agro, Yankee bonds March 2016
Issuer: Myria Agro Holding Company
Coupon: 10.95%
Maturity: 03/30/2016
Ratings: B/B-
CUSIP: M70609AA6
Price: 100.40
Yield to Maturity: 10.76%
Portfolios: FX2 and FX3
Agriculture Ukraine
Agriculture product prices have substantially outpaced worldwide inflation in the last 5 years, resulting in a significant growth in revenues for Mriya. Total revenues grew 32% year over year from 2011 through 2013, and 21% year over year comparing 1H 2012 with 1H 2013.
More Mriya Agro bond information: 10.76% Myria Agro

8.25% Yields, Gajah Tunggal, Yankee Bond, Feb. 2018
Issuer: Gajah Tunggal
Coupon: 7.75%
Maturity: 02/06/2018
Ratings: B2/B+
CUSIP: Y71214AA1
Price: 98.185 (9/26/13)
Yield to Maturity: 8.25%
Portfolios: FX1 and FX2
Rubber Tires, Asia
The increase in net income was a 65% increase from the prior 2011.
More Gajah Tunggal bond information: 8.25% Yields, Gajah Tunggal

10% Yields, Trade & Development Bank of Mongolia, Yankee Bond, Sep. 2015
Issuer: Trade & Development Bank of Mongolia
Coupon: 8.50%
Maturity: 9/20/2015
Ratings: B1
CUSIP: Y8904HAD7
Price: 97.35 (9/20/13)
Yield to Maturity: 10.0%
Portfolios: FX1 and FX2
Mine financing, Asia
The bank recently had record earnings and solid growth in deposits and assets, moving it towards one of the largest Mongolian banks by assets.
More Mongolia Bank Bond Information: 10% Yields, Trade & Development Bank

9.87% Yields, Alto Palermo, Sinking Yankee Bond, May 2017
Issuer: Alto Palermo
Coupon: 7.875%
Maturity: 5/11/2017
Ratings: NR/B
CUSIP: P0245MAC3
Price: 94 (9/18/13)
Yield to Maturity: 9.87%
Portfolios: FX1 and FX2
Trophy Real Estate Properties, South America
Profitable high end malls provided good profits and low debt, with highly value real estate assets.
More Alto Palermo's Bond Information: 9.85% Yields, Alto Palermo

9.66% Yields, Ferrexpo, Yankee Bond, Apr 2016
Issuer: Ferrexpo
Coupon: 7.875%
Maturity: 4/07/2016
CUSIP: G34361AA6
Ratings: NR/B
Price: 95.95 (8/23/13)
Yield to Maturity: 9.66%
Portfolios: FX1 and FX2
Steel Industry, Europe
Net income exceeding average. Ferrexpo reduced freight expenses by a whopping 33 percent, which help prompt upgrades.
More Ferrexpo bond information: 9.66 % Yields, Ferrexpo

8.4% Yields, NordGold, Yankee Bond, May 2018
Issuer: NordGold
Coupon: 6.375%
Maturity: 5/07/2018
CUSIP: N64523AA6
Ratings: Ba3/NR
Price: 92.25 (8/16/13)
Yield to Maturity: 8.4%
Portfolios: FX1 and FX2
Gold, Asia/Africa
Revenues in H1 2013 increased by 17% from H1 2012 to US$617.1 million. The increase was mainly due to higher production volumes and gold sales, but was somewhat offset by lower realized gold prices (down 10%).
More NordGold bond information: 8.4% Yield NordGold

11.22% Yields, Aeropuertos Argentina 2000, Yankee Bond, Dec. 2020
Issuer: Aeropuertos Argentina 2000
Coupon: 10.75%
Maturity: 12/1/2020
CUSIP: P0092MAD5
Ratings: B3/B-
Price: 98.5 (8/6/13)
Yield to Maturity: 11.22%
Portfolios: FX1 and FX2
Airport Management Monopoly, South American
2012 Revenues in Argentine Pesos were up 66% and Net Income was up 46%. This is a sinking bond where about ½ of the principal will have been returned by Oct 2017, therefore it has reduced risks and increased cash flow.
More Aeropuertos Argentina 2000 bond information:11.22 % Aeropuertos Argentina

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The chart below compares the last 9 Yankee Bonds we placed in FX1 with the USD Emerging Markets Bond ETF US (BATS:CEMB) and Total Bond Market ETF (NYSEARCA:BND). This is a relatively small sample of issues that we have reviewed as selected for addition to our fixed income clients, and it is not intended to be a complete comparison that can or should be made. We focus more on short "maturity certain" bonds cycles when interest rates are climbing. By making comparisons in several categories, such as indicated yields and projected costs, it becomes much easier to see why this approach to fixed income investing is so attractive. Considering that we have successfully steered clear of any bond defaults with this high yield, high cash flow, short maturity model, it's also easy to understand why most of our bonds selections are simply held to maturity.

Name

Yield to Maturity

Expenses

Average Maturity

iShares Emerging Markets Corporate Bond

4.73%

0.60%

7.59 years

Total Bond Market ETF

2.47 %

0.10%

7.5 years

Fixed Income 1 portfolio

9.47%

0.50%*

3.38 years

Fixed Income 1 compared to the best.

The FX1 last 9 USD bonds offer about twice the yield of the iShares emerging corporate bond ETF.

The Fixed Income 1 last 9 bonds issues cost .40 basis points more than the very low cost BND ETF.

The last 9 Fixed- Income1.com bonds average maturity is about 55% shorter than the BND ETF

Click to enlarge

*This is a proposed cost only.

We hope you enjoy our high income approach.

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Please note that all yield and price indications are shown from the time of our research and acquisition for some client portfolios. Our reports are never an offer to buy or sell any security. We are not a broker/dealer, and reports are intended for distribution to our clients. As a result of our institutional association, we frequently obtain better yield/price executions for our clients than may be initially indicated in our reports. We welcome inquiries from other advisors that may also be interested in our work and the possibilities of achieving higher yields for retail clients.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.