Dollars investment

[fido]

I'm surprised at how few people seem to know about this. Through BHD's commercial division, BHD Valores, you can purchase Dominican government bonds issued in US Dollars through the Ministerio de Hacienda - which is the Dominican equivalent of the US Treasury. These bonds are traded on the secondary market here(Puesto de Bolsa, which is like the US stock exchange)and can be sold at any time.

You can also purchase Dominican bonds issued in pesos through BHD Valores. The last ones I bought were for 15.9% that I had for 5 years. Factoring in the devaluation of the peso, my net return was around 10%. Very nice. Current government bonds in pesos are at around 11%.

When buying bonds in pesos you have to keep in mind the risk of the devaluation of the peso - that's why they are currently paying 11%. For the past 11 years that I've been here that has been at about a rate of 3.5% per year. Past performance is no guarantee of future returns.

This is a good piece of advice and I appreciate everyone that has chimed in in regards to BHD Valores and bonds investment. I will do further research.

 

[j&t's future]

Where's JD JONES when you need him?

 

[Kipling333]

fido you did not mention that the Government bonds are not available all the time .You must have purchased those Dominican bonds many years ago because they that interest rate is definitely not available at present. They certainly used to be great value for people living in the DR who had pesos to invest .The latest issue of government bonds ,underwritten by an American merchant bank had an interest rate under 7% ..I can not recall the exact rate but was oversubscribed .

 

[Kipling333]

Must correct myself.. the latest government bond issue in dollars 6 .75 % ..and in pesos either 10 or 11% depending on the maturity date ...the latter is what Banco Popular also offer for certificado de Deposito for 10 years

 

[cavok]

Of course the interest is higher for the CD's in peso accounts because there is potentially great volatility in the FOREX rate of the peso. Sometimes you pick a time frame where you do well. The original question was about US Dollar investments and not peso accounts. For USD, I would be surprised if there is anything near what DR peso accounts would pay. Someone posted about 3% which I could believe is a fairly "safe" investment that remains in USD.

The interest rate on USD bonds is definitely much less than peso bonds. Last time I checked about 6 months ago with BHD Valores you could get USD government bonds at around 5%. CEPM had some corporate USD bonds through BHD Valores at 7% on the secondary market.

 

[wuarhat]

Why don't you advise your friend to invest in U.S securities. It's legal,all he has to do is register with the man. (IRS)

If he doesn't mind doing a little (very little) work he could read this and piece together a portfolio with ETFs.

https://www.amazon.com/gp/aw/d/B00T...36_SY340_FMwebp_QL65&keywords=meb+faber+books

 

[windeguy]

The interest rate on USD bonds is definitely much less than peso bonds. Last time I checked about 6 months ago with BHD Valores you could get USD government bonds at around 5%. CEPM had some corporate USD bonds through BHD Valores at 7% on the secondary market.

5% to 7% on USD bonds is of course fantastic compared to what is available in the US. As long as you are happy with the risks.

 

[cavok]

5% to 7% on USD bonds is of course fantastic compared to what is available in the US. As long as you are happy with the risks.

That's true. Even though these are USD demoninated sovereign bonds, you are still investing in an emerging market country and the risk that goes along with that. There are many emerging market countries, including Mexico and Brazil, where you can get 7%-8% on 10 year USD sovereign bonds.

Gone are the days when you could get 6%-7%(and even higher for a while) on risk-free FDIC insured CD's. Now, if you want to get any kind of return, you are forced to take risk. The higher the return - the higher the risk.

 

[windeguy]

That's true. Even though these are USD demoninated sovereign bonds, you are still investing in an emerging market country and the risk that goes along with that. There are many emerging market countries, including Mexico and Brazil, where you can get 7%-8% on 10 year USD sovereign bonds.

Gone are the days when you could get 6%-7%(and even higher for a while) on risk-free FDIC insured CD's. Now, if you want to get any kind of return, you are forced to take risk. The higher the return - the higher the risk.

I remain committed to a mix of mutual funds rather than investing much in such bonds. That strategy allowed me to retire early. I have always had the mindset that those in companies with big money have a goal to succeed and I tend to follow their lead. Other strategies like day trading and Forex are not places I care to go.

 

[Uzin]

I don't think DR classifies as an Emerging Market economy, not even close, not even in 10 or 20 years. I am not sure but their government bonds are probably classified as "junk" by main institutions....

 

[cavok]

Maybe not(?). The economy is probably too small compared to what are normally considered emerging markets and the bonds are just one step below investment grade and do fall into the "junk bond" status.

 

[Kipling333]

I disagree Uzin ..I think that the DR is a classic Emerging Market economy with an increased diversification of industries and great control over the national economy .Technically the DR bonds are still junk but with the DR now borrowing at record low interest rates ,I believe that many lenders regard them as better than junk .

 

[Uzin]

I disagree Uzin ..I think that the DR is a classic Emerging Market economy with an increased diversification of industries and great control over the national economy .Technically the DR bonds are still junk but with the DR now borrowing at record low interest rates ,I believe that many lenders regard them as better than junk .

That's the problem, they are borrowing quite a lot at, now, low interest rates, if/when the interest rates go up there will be big trouble here. ..