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This is interesting, these will be low risk bonds with a better yield than treasuries. It could be a safe place to park money during the coming recession and ge
by slashdev 3y ago
This is interesting, these will be low risk bonds with a better yield than treasuries. It could be a safe place to park money during the coming recession and get paid for waiting.
Up to 40 year duration, although long duration bonds carry a very large interest rate risk and either make lots of money on a fed pivot or lose lots of money if inflation doesn’t drop and rates go higher.
- nafey 3y agoWhy are they low risk? There is a significantly higher chance of meta defaulting than us govt on a 40 year horizon. Also wouldn't higher interest rates be beneficial for Meta (and worse for lenders) because Meta will be able to lock in the comparatively lower interest rates now for the next 40 years?
- slashdev 3y agoHigher interest rates in the future are good for Meta, bad for people holding the long duration bonds. And visa versa. Meta bonds would have a very high rating, and a very low risk of default. Not as good as bonds from Apple or Microsoft, but better than most corporate paper. I wouldn’t want to hold them for 40 years though. My personal view is meta is the tech giant least likely to remain a going concern.
- kevinventullo 3y agoYou think banking on Facebook being around in 40 years is low-risk?
- slashdev 3y agoNot really, but there are bonds of many durations, not just 40 years. You also do not have to hold them to maturity.
- hnfong 3y agoBe careful, SVB went bust because they invested heavily into long term debt securities and got a big haircut when interest rates rose steeply in 2022. At 40 year duration even a 1% interest rate hike could greatly affect the market price of the bond. While the market seems to be betting that rates won't rise much more, the possibility of stagflation isn't off the table yet IMHO.