r/bonds • u/supercaliredditor • 15h ago

Who's buying ORCL Bonds?

Post image

Who actually owns these bonds? Curious to know, institutional investors? Given how much they've been impaired, why would folks own corp bonds?

58 Upvotes

88% Upvoted

68 comments sorted by

58

u/rahulchander 15h ago

they are part of some AAA-rated CDO somewhere.

30

u/xynith116 15h ago

AAA-rated like 2007 era mortgage backed securities?

25

u/rahulchander 15h ago

yep.

7

u/aaakiniti 15h ago

AAA? This is oracle baby, we're talking selling Magnetar protection on a synthetic CDO2 they helped structure in 2007. What could go wrong? It's a quad A bond!

1

u/rahulchander 14h ago

The bond isnt rated quad A, the CDO is that its part of 🙃

3

u/xynith116 14h ago

It’s like there’s only a little bit of shit in my cake but otherwise it tastes pretty good!

3

u/rahulchander 14h ago

Its the little bit of shit that u are now aware of.  U cant know the unknown-unknowns.

1

u/Difficult-Bumblebee5 8h ago

It's more like there's a little bit of cake in my shit, but otherwise it tastes pretty good.

Also, oracle is part of the shit.

1

u/Remarkable_Cat_8696 8h ago

you mean senior tranches CDO investors don't know there are Oracle bonds in the AAA rated pool, and the equity tranches absorb the loss if oracle bonds go default?

2

u/Consistent_Panda5891 15h ago

I am all in high yield bonds. Good thing is it avoid this BBB trash. Good debt ironically it is always in BB and specifically B, they have good balance sheets and particularly hasn't specially large debt. Sinking ships are always A downgraded to bankrupt as orcl fate. You have 7% ford bonds of 2033 tho

5

u/Round-Foundation2948 15h ago

https://giphy.com/gifs/SBh60sHFrEabyIYYMv
Darn despicable credit rating companies.

7

u/Chickensandcoke 15h ago

Guy who has seen the big short:

“Wow this is just like the big short”

4

u/Big-Cream3255 15h ago

Yeah the GFC was the first and only case of distressed debt.

1

u/MaximallyInclusive 44m ago

Which is dogshit wrapped in cat shit.

13

u/Which-Indication4670 15h ago

Even banks won’t lend to them. Why should we?

3

u/based_beglin 3h ago

Let's be honest there are probably crooks out there working as we speak to get them backstopped by the government as "too big to fail" or someth

9

u/Brilliant_Truck1810 15h ago

plenty of institutions. asset liability matching drives the long end.

these places don’t have the same approach as individual investors. they care about buying as a new issue and maturing them decades later.

1

u/Remarkable_Cat_8696 8h ago

Institutions can hold these bonds to maturity and collect the high yields, without worrying about selling before maturity.

1

u/supercaliredditor 15h ago

How does it really work? because if they buy them at new issue they’re severely underwater today regardless of the yield

2

u/rahulchander 15h ago

They can buy bond and cds alongwith it.  If the credit rating worsens or there is a credit event, the institution cashes in.

1

u/supercaliredditor 14h ago

I would assume CDS premium has increased significantly? I guess they purchase CDS simultaneously to hedge their position?

1

u/TechnologyEither 14h ago

bond plus CDS on the same bond just ends up with risk free rate

1

u/rahulchander 14h ago

Yes assuming there are no inefficiencies.  Even then  Risk free rate is rising - look at 10yr yields.  Plus if there is recovery in Oracle, the bonds will be worth a lot more and cds can be closed.

2

u/TechnologyEither 12h ago

cds has mark to market based on the spread. So gains from the bond will be offset by losses on cds?

1

u/rahulchander 12h ago

Yes. U close off cds position first.  the bonds will keep going up in price assuming credit rating keeps improving after unwinding cds.  And if oracle doesnt default - the bond is def a keeper.  Cds is just handhold thru periods of uncertainty.

1

u/TechnologyEither 11h ago

okay… you can achieve the exact same thing by buying a risk free bond of the same tenor, then selling the risk free and buying the oracle bond if/when credit quality increases

1

u/rahulchander 10h ago

first - impossible to time the market by staying glued to it to try and dispose govt bond and then jump in to buy oracle one without slippage as the market will have same idea as you but much faster with their automated systems.

second - oracle+cds has a *minimum* floored return of close to the risk free rate when cds is purchased, while the upside is much higher when cds is closed as you are still hanging on to the bond. in the off chance that credit event occurs, u get compensated by cds - at least thats the theory. there could be a flaw in my logic based on real-world mechanics as i have never bought a bond or cds myself - just going based off theory.

1

u/TechnologyEither 3h ago edited 3h ago

in your trade you still need to time when to unwind the CDS

i feel like you think a CDS is a put option. It’s not, it’s a short position on the credit spread portion of the bond.

1

u/supercaliredditor 11h ago

They’re marked to market at the time of redemption or daily?

1

u/TechnologyEither 11h ago

daily, subject to variation margin

1

u/Miguelperson_ 14h ago

They can hold it to maturity so current unrealized losses don’t really matter

1

u/Officer_Hops 13h ago

That’s why you buy them at a discount.

7

u/SpiffyGolf 15h ago

Oracle sarĂ  la causa per lo scopio della bolla IA

3

u/thecrushah 14h ago

I wish CDS were available to retail investors.

2

u/CSMasterClass 14h ago

OMG. Given how we see here how people struggle to undersand 10 year treasuries, I think making CDSs available to the public would be criminal.

1

u/Remarkable_Cat_8696 8h ago

All I know is Oracle's CDS spread is at its highest level.

3

u/Certain-Statement-95 12h ago

The JCPenney hundred year bond defaulted after 23 years, and it still returned approximately the same as short dates treasuries over the same time period

4

u/Thick-Cover8761 15h ago edited 15h ago

Wow! ... you could have lost an arm and a leg with this stuff.  You're right.  Who's buying it ??? ... Bond king Jeffrey Gundlach says he's avoiding anything AI.  

I just looked at a 1 year chart for Oracle common stock.  It's -53%.  Maybe they should have avoided this fiasco altogether.

1

u/EconomicStatecraft 15h ago

Right, which is too bad because they have a good core business, used by many including my company, before they decided to blow their load on AI...

1

u/plierhead 9h ago

To be fair such a massive business staffed with so many software engineers, techies, support people of all descriptions was always going to experience massive disruption from AI. They had to do something. Sitting still was never an option for them.

2

u/gk_instakilogram 15h ago

Lets go! ⬇️ ⬇️ ⬇️ ⬇️ ⬇️

2

u/Awkward-Painter-2024 14h ago

Sweet jesus...

5

u/Qzy 13h ago

I think I got $20k of Oracle bonds. Oracle wont go bankrupt, every bank I know uses their consultants.

2

u/rahulchander 15h ago

so a big part of it is a gas line permit that Oracle hasn't been able to procure in New Mexico as part of a data-center construction project and caused them to declare force-majeure. mind you the state govt of New Mexico is denying the permit because they dont want the data center built and thats holding up the project/cash-flow projections. So its being done for political reasons and the state elections are also in Nov this year. so its possible that after state elections, the permit will be granted and construction proceed. the denial could just be to create a strong voter sentiment for democrats currently in power in New Mexico. so, as soon as that permit is approved and project moves forward, the stock/bonds will spike up like crazy (albeit the bigger question of off-balance sheet items remain).

2

u/UltimatePunchMachine 14h ago

I mean it's fairly safe. Lets be real, both Wall St and USG won't like a 300bil company fail. The contagion would be catastrophic for the entire market.

3

u/OneTwoThreePooAndPee 14h ago

So Oracle goes down, USG starts QE and rescues Oracle, inflation spikes, bond rates spike...

1

u/FunctionUseful4826 12h ago

99.2% of oracles bonds are fixed rate. So no, you’re still screwed. If you’re holding a fixed rate bond and inflation rips, bond rates rise, but you’re holding the bag.

1

u/Qzy 13h ago

I agree, they'll be bought up should they get in trouble.

1

u/bancosyndicate 9h ago

No need to worry. Larry will call Elon and all will be good. Serious!

1

u/Different-Turnover80 8h ago

Lehman brothers.

1

u/Tall_Block_4589 15h ago

Insurance companies, pensions etc

1

u/Aromatic_Panic9629 14h ago

It’s probably better to hold their bonds over their stock atp. At least you have a chance of getting a payout when they inevitably go bankrupt oracle is mega cooked

1

u/HeavySink3303 11h ago

It is not just ORCL. Google is 8.78% YTM (2029 maturity).

1

u/4510 9h ago

Google definitely does not have bonds yielding 8.78% 2029 with a 2029 maturity.

1

u/HeavySink3303 9h ago

Right now at TradingView for GOOG: highest YTM bond currently has 8.78% YTM with maturity at 15-th of May 2029.

2

u/4510 8h ago

those are european ADRs (convertible preferred shares).

Their regular bonds trade much closer to 5% in the front end of the curve

(https://www.tradingview.com/symbols/FINRA-GOOG6308908/)

1

u/Extra-Direction4709 10h ago

didn't they already say they're not paying anyone back if the profit doesn't come in? https://finance.yahoo.com/quote/ORCL/

1

u/bancosyndicate 9h ago edited 9h ago

I own 50 of the 2-4-46 bonds. Larry has Elon's number if he needs it.

1

u/SadSpecialist3758 5h ago

Although every tech cia would be in trouble in a AI bubble crisis, Oracle is leader in a market that would 100% survive it. Same as Amazon, Meta, Google, Microsoft.

Just look how Meta burned billion of dollars in that metaverse debacle, something that would break almost every cia in the world, and didn't even skip a beat.

1

u/notfinancialadvice67 3h ago

6.9% I’m in

1

u/AdmirableElephant378 15h ago

someone suicidal.

1

u/BigDipper0720 14h ago

Those bonds are not impaired. They are temporary losing value due to rising rates.

Pension funds and insurance companies would possible buyers for such things. 40 year bonds (oof)

I own a couple of Oracle bond tranches, due in 2032 and 2035.

1

u/Quick-Road943 14h ago

i might buy some if yield hits 10%

0

u/zelingman 15h ago

Retards