Ann: Update - Notification of buy-back - NBI, page-3

Last year, NBI and its underlying bond holdings were priced to "perfection", i.e., expectation of no near-term increase in reserve bank cash rates and no increase in bond default rates. Twelve months later, reserve bank cash rates have increased substantially. NBI's holdings are all based on fixed income with an average 4 year duration. NBI has very little in the way of holdings expiring next year, so it's going to be tough for NBI to take advantage of the market in the near future.

Additionally, there's the threat of a recession in 2023, an event that will impact default rates, which have been close to zero the last couple of years. Normally, default rates on junk bonds are in the 2 to 3% area, with 30% to 50% capital recovery.

The above is already priced into the bonds that NBI holds (NTA has come down in the last 12 months); the NBI share price discount to NTA provides a substantial cushion to a new investor. For long-term NBI holders, you have to figure that there will be a time again where cash rates are falling and fixed income becomes relatively more attractive again (and then NBI trades closer to NTA). Many economists are predicting that will be within the next 6 to 12 months, but it's a tough phenomenon to predict accurately.