What you say is true...
Stock players are generally more short term oriented. They trade more often than bond investors so they can afford to look shorter term and also can afford to buy "expensive" stocks cause they will look to trade out of them when the momentum dies.
Bond holders are looking more long term, i.e. 2 - 5 years. They dont want to trade...they want the income. So the more perceived long term risk the more yield required, even if the company is currently on solid ground.
If you are looking for another S.American bond play with nice yields try symbol SID bonds. CSN Iron in Brazil has some nice yielding bonds. One of the lowest cost manufacturers of steel and steel products in the world. I think you can get around 12-13% yield on them.
I agree that the bonds are a good buy.
While it is clear that the TMM bonds generally will not trade higher than the sovereign debt, they trade at spreads that imply a lot more risk than the equity holders seem to believe there is. Equity punters seem pretty sure that earnings will increase, bond holders seem to think that there is some serious risk (compare TMM to Cemex or Walmex bonds, and then compare Cemex' PE to TMM's).
The issue that keeps the yields "relatively" high is the ratings on the bonds and the US economy slowing dramatically.
I own $70,000 of the TMM bonds, $20,000 of which I bought a week ago. The debt of foreign corporations cannot be rated higher than the country's soveriegn rating where it is located.
So, in effect you get a better yield on a good credit than you would if this were a US based company. I took advantage of this during the prior Mexican crisis by buying CEMEX bonds at yields between 15%-26% to maturity.
The second reason the bonds are under priced is the worry about the US economy.
In my opinion the bonds are an excellent buy at these levels.
It's hard to tell. I think that TMM is on the mend after nearly losing it last year. Sometimes its hard to take the bond pricing seriously since these emerging market bonds are thinly traded, but the bid and ask spread in the information I have is not that big, which tells me that the market is not far off the high yields being quoted.
Since I am planning to hold the stock at least through this year, I am hoping that the stockholders have a better handle on the company's prospects. Maybe I should buy some debt too.
Is there anyone on this board who has a sense of how TMM is doing? What was the reorganization/merger with controlling parent all about? Is the business doing well enough to service the debt? Anyone?
This stock may still have some legs. From what I have heard, TFM has renegotiated debt so that it can pay dividends and will be consolidated into TMM (that's what the consolidation is all about). The top line will improve and it looks like the bottom line will continue to improve. Their stock has rocketed up from its depths, but others still worry - TMM bonds pay over 14%. Talk about a spread.