5 ms·

8% yield doesn't sound like free fall.

fancyfacebook 9y ago
When your yield moves from 6 to 8% and your debt is rated junk (seven levels below investment grade) yes it is free fall. The bond price/yield chart appears to be going parabolic in the past few days.
- slededit 9y ago
  Its amazing your getting downvoted. Anyone who even looked at bond pricing in the last few years would be shocked by an 8% yield, and a 2% short term move. Those numbers are simply not normal for any healthy company post 2008.
  - perl4ever 9y ago
    It's only relevant if they need to issue more bonds, though, I would think. Couldn't they issue stock? As we see with ICOs, and Tesla's soliciting of deposit money, and other companies issuing stock with no voting rights, there seems to be a vast ocean of capital floating around that people can be sweet-talked out of for almost nothing. Heck, maybe they could start a GoFundMe.
    - Analemma_ 9y ago
      > Couldn't they issue stock? They could, but with TSLA down almost 30% in a month and shareholders already grumbling, they are fast approaching the limits of what they can tap in the equity market. > Heck, maybe they could start a GoFundMe. Please be serious. Tesla is losing $400 million every month and has over a $1 billion in debt payments due over the next year. We’re talking about big person money here.
      - perl4ever 9y ago
        $400 million every month? What is your source? The latest official financial filing says they lost an average of $163 million per month in 2017. See https://www.sec.gov/Archives/edgar/data/1318605/000156459018002956/tsla-10k_20171231.htm https://www.sec.gov/Archives/edgar/data/1318605/000156459018...
dragontamer 9y ago
Bonds fall up, and rise downwards. Its a bit confusing if you aren't used to bonds, but that's the terminology. Its because if you have $950 in bonds, and interest rates rise, then your $950 is worth less (maybe $930 now). Similarly, if interest rates fall, then your $950 is worth closer to $1000.
mynegation 9y ago
Yields on bonds go up when when bond price goes down. You can think of it this way: Tesla bond would have to pay 8% for investors just to be on par (break even), given the current interest rate regime. Of course, bond pays the fixed rate agreed at the issuance, so if you are bondholder, your bond is now worth less, and - if you sell it now - you realize the loss. Put another way, if Tesla to issue new bonds, they have to issue them _at least_ with 8% coupon, because investors will demand premium for risk.
- Stanleyc23 9y ago
  thanks for the intuitive explanation
jonknee 9y ago
It sounds like you don't trade bonds.

When your yield moves from 6 to 8% and your debt is rated junk (seven levels below investment grade) yes it is free fall. The bond price/yield chart appears to be going parabolic in the past few days.

slededit 9y ago
Its amazing your getting downvoted. Anyone who even looked at bond pricing in the last few years would be shocked by an 8% yield, and a 2% short term move. Those numbers are simply not normal for any healthy company post 2008.
- perl4ever 9y ago
  It's only relevant if they need to issue more bonds, though, I would think. Couldn't they issue stock? As we see with ICOs, and Tesla's soliciting of deposit money, and other companies issuing stock with no voting rights, there seems to be a vast ocean of capital floating around that people can be sweet-talked out of for almost nothing. Heck, maybe they could start a GoFundMe.
  - Analemma_ 9y ago
    > Couldn't they issue stock? They could, but with TSLA down almost 30% in a month and shareholders already grumbling, they are fast approaching the limits of what they can tap in the equity market. > Heck, maybe they could start a GoFundMe. Please be serious. Tesla is losing $400 million every month and has over a $1 billion in debt payments due over the next year. We’re talking about big person money here.
    - perl4ever 9y ago
      $400 million every month? What is your source? The latest official financial filing says they lost an average of $163 million per month in 2017. See https://www.sec.gov/Archives/edgar/data/1318605/000156459018002956/tsla-10k_20171231.htm https://www.sec.gov/Archives/edgar/data/1318605/000156459018...

dragontamer 9y ago

Bonds fall up, and rise downwards. Its a bit confusing if you aren't used to bonds, but that's the terminology. Its because if you have $950 in bonds, and interest rates rise, then your $950 is worth less (maybe $930 now). Similarly, if interest rates fall, then your $950 is worth closer to $1000.

mynegation 9y ago

Yields on bonds go up when when bond price goes down. You can think of it this way: Tesla bond would have to pay 8% for investors just to be on par (break even), given the current interest rate regime. Of course, bond pays the fixed rate agreed at the issuance, so if you are bondholder, your bond is now worth less, and - if you sell it now - you realize the loss. Put another way, if Tesla to issue new bonds, they have to issue them _at least_ with 8% coupon, because investors will demand premium for risk.

Stanleyc23 9y ago
thanks for the intuitive explanation

jonknee 9y ago

It sounds like you don't trade bonds.