High yield returns from Aussie bank bonds?
In December, Coolabah Capital Investments launched its new Floating-Rate High Yield strategy, which focuses on generating higher income than other traditional fixed income investments by investing in a portfolio of investment-grade Australian Floating-Rate Notes (FRNs) with enhanced yields.
Coolabah’s Floating-Rate High Yield strategy is currently invested in a portfolio of Australian dollar bank and insurer issued senior-ranking and Tier 2 floating-rate notes with an average A- credit rating. As of 21 February 2023, it had an annual yield to maturity of 8.67% p.a. after fees that has been enhanced by applying gearing.
Coolabah’s Floating-Rate High Yield strategy does not invest in equities, hybrids, foreign issued bonds, or fixed-rate bonds. It is exclusively focussed on Australian-issued bonds that are floating-rate and which are either senior-ranking or Tier 2 (subordinated), both of which sit above hybrids in the capital structure. It uses leverage to enhance returns, which also amplifies downside risks.
Coolabah applies bottom-up and top-down fundamental analysis of issuers of the securities and the credit quality and structural features of the securities themselves to build a portfolio of Australian bonds that offer attractive yields whilst minimising default risks.
Contact Coolabah for more information on the Floating-Rate High Yield strategy.