“Burrito bonds” may cause indigestion

Andrew Allentuck was kind enough to quote me in his November, 2014, piece “Burrito bonds” may cause indigestion:

The 8% cash interest payment is £80 a year on the £1,000 note, or £320 over four years. The weekly free burrito boosts the return. During the four-year term, a bondholder would get 208 free burritos. Each burrito costs £6; that’s £1,248 worth of burritos. Add the £320 cash interest and the total return on the investment would be £1,568 – or 157% of an interest-equivalent return.

In contrast, the Bank of England currently offers 1.5% on its five-year gilts. On a £1,000 note, that would buy you two and half burritos a year. Not surprising, the burrito bond issue was heavily oversubscribed, given the current climate of low interest rates that provide insufficient income.

Even without the nosh, the Chilango bond would find takers, says James Hymas, president of Hymas Investment Management Inc. in Toronto, “especially when you offer 8% on a bond.”

Chilango has very fancy website and trumpet the success of the bond issue.

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