Money Market accounts

[DOGS THAT BARK]

Why are there such variences in returns on diff currencies in Swiss Banks Money Market accounts?

Also noticed there are taxes of Swiss currency accounts--and also USD accounts if you are U.S. citizen--

Money market funds rates
Currency Interest rate
US Dollars 5.00%
British Pounds 5.25%
Euros 3.75%
Swiss francs 2.00%
(As of 06/2007)

 

[selkirk]

DTB the Swiss Franc have low interest rates for a variety of reasons:

1. low inflation
2. large amount of demand (banking center for companies and indivuals)
3. actaully there are some very large swiss companies and other int. companies that do most of their banking.
4. has been seen as a safe currency (not to be destoryed by inflation) through the decades.
5. the Euro has probably increased the demand for the swiss franc as a safe alternatvie..
6. the swiss franc is backed by gold....now I do not know the number at one time 15 years ago it was very high, however compared to other currencies (believe 25% is backed by gold, someone will correct this was much higher 10 years ago....) yes I have accurate 10 year old info...lol.

actually though carry trades are often done with the japaneese yen a smaller number are sometimes use the swiss franc.

thanks
selkirk

 

[DOGS THAT BARK]

Thanks Kirk--swiss franc would not be option with their low rate and added tax--
Just looking for alternative to USD--You have any suggestion?
Have account in China--but they have small limit unless you want to jump through hoops with paperwork.

 

[selkirk]

DTB I have an int. bond fund, a way of playing foreign currencies....has not been good the last three years...flat.

Australia, Canada are currency that are often seen as resource currencies....that is simplisitic.

Aus may raise rates to fight inflation, so that is one that might worth a look.

Cdn. dollar trades at par, and may go 1.10 however believe bank of Canada will for the most part lower rates in line with the US. they will drop 50 basis points in March, have done 25 basis points since Jan. 1.

Cdn. does not want the currency to go to 1.10 so it will stay flat.

Cdn. has a surplus, and is paying down debt.
In the past have owned Iceland Bonds, they paid a high yield, and years ago New Zealand.

in these situtations you need to look into the country and often the extra risk you take.

perphaps look into a int. bond fund, or etf (they also have etf that hold int. companies, that pay high diviidends.

also when you are buying a foreign company some of your returns or losses are in the currency move.

thanks
selkirk

 

[redsfann]

perphaps look into a int. bond fund, or etf (they also have etf that hold int. companies, that pay high diviidends.

also when you are buying a foreign company some of your returns or losses are in the currency move.

thanks
selkirk

Could you mention the fund or funds that you are holding, Selkirk?

I have just started to take a look at Int. bonds or an ETF of said funds to stash some $$ in this turbulent market.

Thanks in advance...

 

[selkirk]

Redsfann the fund I own not sure is listed in the US, they may have a preffered.

will list a few options and then some of the etf, funds I own. so over the next week. will have them all listed.

two do not own but looking at, well only one.
both listed in the US
two etfs

SPDR Lehman International Treasury Bond ETF (BWX)
this holds treasuries from major developed countries around the world.

BWX $54.39

+ high credit limit, on average AA credit rating. lowest rating is A and that only counts for (just under 12%)
+ diversified holdings. and a good way to have exposure to non US dollar

- mer is .50% which is not high however compared to the coupons is still a large percentage.

- 3.50% yield, that seems low, especially considering if inflation is running at 3-5%. per year.

so a good way to diversify and very safe, the main drawback is the low yield, so it is worth looking at a few times a year, to see if it is improved. for now it is a pass for me.

iShares Emerg Mrkt Bond E.T.F. (emb)
price $100.36

this consists of 36 emerging market bonds, average credit BB
expense ratio .60%
yield 5.70% (will yield 5.50-6.70%)

the main benefit is a great way to play emerging market debt, fairly cheap .60%, also many of these nations and companies listed have improving credit (upside).

for the time being I would pass, would like to get a yield of 8-10% (would probably look at it higher than 7%).
it is unclear if we past the worse of the debt/credit crisis, so would wait, this will go on sale if there are more large writedowns in Europe and US.

also want around 8-10% if I am holding BB emerging market debt. another worth watching if it goes on sale.....

should note BWX is very safe compared to EMB, just yield is limited. EMB for the risks one is taking.
yield is to low currently for myself.

will post some more etf in a few days.


thanks
selkirk

 

[redsfann]

iShares Emerg Mrkt Bond E.T.F. (emb)
price $100.36

this consists of 36 emerging market bonds, average credit BB
expense ratio .60%
yield 5.70% (will yield 5.50-6.70%)


Like the yield on this one. Will look at it a bit closer. Agree that it is a bit low for the risks that are still out there, but I'm only looking at a small % of my overall portfolio, so if it tanks for a bit, I'm not getting hurt too bad.

Really like the ease of buying/selling ETFs and their low expenses. Thanks for the response, Selkirk--looking forward to the rest of your ideas on this topic.

 

[selkirk]

One of my oldest investments in int. currencies, is FAP on Toronto (ABERDEEN ASIA-PACIFIC INCOME INVESTMENT Fund).

I have had this fund in a DRIP/SPP account Dividend re-investment account and share purchase account...also sometimes bought this for my trading/investment accounts.

The stock (closed end fund) trades at $7.05, yields 8.51% .60 dividend. should also note the dividend has been decreased.

this is not a surprise as they were not earning the dividend the past year, actaully the stock has gone up since they cut the div...from 6 cents monthly to 5 cents monthly.

it often trades at a discount to NAV (currently 7.55%, it holds Asia and Australia bonds, now mostly Asia. credit ratings are for the most part BBB or higher, often A or higher.

experienced management, and have the divs reinvested to buy new units.

Problems
1. though a good long term history (have had it for a long term) of around 8-10%, in the last 3 years it has basically made nothing.

2. this is because these are bonds in Asia countries...often (over 40% is in US currency, often over 50%)...so this is not really a good choice for a US investor...who wants to diversify.

for a cdn. investor it is a better choice, half a play on the US dollar and other currencies. in the past few years have kept my holdings in this fund small since the cdn. dollar has been going up from .65 to par.

the only surprise I have had is that the speed of the rise...the cdn. economy is much stronger than 15 years ago, and we did face a major debt problem...ie. Argentina..... though now the federal government has surpluses.

FAP has increased its NAV from 7.37 year end to 7.65 currently. will be buying some for my trading account soon and hope for a 10% or more gain for the year.
will do this over time, couple months, since there is a risk the cdn. dollar goes to 1.10...though it should trade where it currently is at par or just below....for me it is insurance.... and buying it at 7-10% discount is not bad...with monthly div.

EMB emerging bonds, and VWO emerging stocks, is probably two additions most investors could make to an etf portfolio.

own VWO long term holding, will probably own some EMB soon....small amount.
there is another etf similar to VWO however VWO has a lower expense ratio....always go with the cheaper etf.

believe many etf provide good way to invest, liquid, diversify, and you can track other investments againts your index (etf ) portfolio.

will post some high yielding etfs, in a few days.

thanks
selkirk