In layman terms, it means they will suffer a capital loss that would be very very difficult to make back. Imagine that your Private Banker introducing you to purchase a 4 year corporate bond with a yield of 7.1% in 2013 Then because its a bond, and upon the recommendation of your private banker to do bond leveraging you decide to purchase the bond with 50% leverage at less than 1.5% interest. Your leveraged yield becomes 12.70%. In a low yield environment for ......
When someone reputable offers you an investment, don’t just invest based on reputation.
You have to have the competency, to evaluate the risks, the probability of risk event happening and the impact.
Last week, I wrote about the sudden news of Swiber Holdings winding down. One of the consequence of this event is that the bond holders may face an impairment of their capital.
