Saturday, September 20, 2008

Pinnacle Notes and MiniBonds

This blog was first posted on 16 July 2007

COMMENT POSTED IN MY BLOG:

Maybe you like to comment on the Minibonds and Pinnacles. Both recieved overwhelming response from the public. What I know they are products designed for people who want streams of income. The tenor is 3-5 years with step up options with higher returns.
Since they are well received they must be good. Investors don't throw away $150 mil. for each tranche for nothing. There had been quite a few tranches already.

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REPLY:

Can you give specific examples of the earlier series of the Minibonds and Pinnacle Notes. What price are they trading now? How well have they performed? Did they provide a good return to the investors?

I have highlighted some of the current features of these products. They contain an element of speculation and carry a risk that has not been properly assessed.
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3 comments:

Tan Kin Lian said...

An investor in an earlier series of Pinnacle Notes told me that the current price of the notes is about 97%. If he sells now, after investing for some time, he still lose 3% of the principal.

I try to find the price of the earlier series of the Pinnacle Notes. It is not quoted anywhere. It seems to be a mystery (i.e. lack of transparency).

July 17, 2007 8:13 AM
Anonymous said...

This means that price has adjusted to
the interest rate . The yield has gone up.
Like bond, there is an inverse relationship between price and interest rate. If you hold it to maturity you get back the par. He continues to receive the coupon quarterly or semi annually regardless of price change.

July 17, 2007 1:31 PM
Unknown said...

Minibonds are now in trouble due to Lehman's demise. So it's not just a case of interest rate risk but counterparty credit risk.

September 19, 2008 3:53 PM

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