RE: RE: MFC targets HK GrowthRemember also MFC is not losing money trading in Bonds.
Investors are rushing into Bonds forcing the Bonds' prices up.
Simple example.
MFC bought 10 yrs Bond at 5% for a client ( 5 yrs ago)
They will receive that 5% ( coupon rate) annually until maturity + principal
How can they lose money here ?..... Bonds are the safest investments.
However Bonds are very liquid and do trade with interest rate movements.
So Investors wanting to buy that 10 yrs Bond with a 5% coupon
will have to pay more for it, thus driving down the yield.
It is tantamount to buying a stock, the price will go up, the dividend will be the same,
but the dividend yield will go down.
The problem is the mark to market reporting.
MFC has to increase their reserves (write offs )when the rates go down...
but can shows the Bonds' increases (profits) only when sold.
Don't make sense... but its the rule
Interest rate will reverse someday, and this write offs will be written on back.