Why NOT Singapore Corporate Bonds ?
Because if you had bought the into inaugural 30Y SGS issue at its auction in March this year, you would be sitting on an 8% return (10% if you had sold 2 weeks ago) for only 5 months ! Last done price on SGX was 107.925 on 7 Sep 2012.
|NA12100N 420401 10||PH1S||107.925|
Correct me if I am wrong, but I believe this is a higher return than 95-99.99% of the corporate papers issued this year, including the star China Central Properties. Link to 2012 SGD Corporate Bonds Hall of Fame.
Here are the latest prices I could salvage. (Qualifier : Accuracy of data is based on last bid price I took off Bloomberg – No guarantees what the banker quotes for retail etc).
Now, who is holding their nose up to SGS ?
For the faithful readers, here is the catch you have been living with.
“UOB Asset Management Ltd.’s Singapore dollar debt fund is beating most peers by buying perpetual bonds and investing 70 percent of its money overseas as rates on bank deposits and sovereign yields approach zero….The picks helped the plan return 5.1 percent this year through Aug. 29, topping 78 percent of rivals …“
5.1% for all that slogging, slaving and stressing away.. and not to mention RISK of buying all those Perps ? VS A no brainer investment in Singapore Govies which gives a better return ?
So why the hard chase ? Because you know bankers get hard rebates for each corporate issue they sell. If I am not mistaken, I heard the latest shipping perp was about 50 cts (that is just about SGD 5K per million).
And it does not matter if you buy or sell. The minimum spread they will take is 20 cts off the bid-offer price, only reserved for family and friends.
Words of Advice
- Bankers sell you the idea of the YIELD and how great it is but remember there is also the PRICE component too
- Selling the 30Y SGS now would net you the 8% return (16% roughly if annualised) but if you hold on to it, you will only be getting 2.75% in coupon for the next 30 years ! and your 100 bucks back.
- The Singapore government is rated AAA which is a lessor credit risk.
- There are little avenues for retail buyers to hedge senior bond credit risk and much less avenues to hedge PERPETUAL BOND RISK… this is just in the market dries up a little and widens out to impossible spreads. For example, if Genting Perp were to quote 70 cts – 90 cts instead of the current 1.024-1.026.
- This is not a gold rush. Debt is not going anywhere and we are closer to hell in yields than heaven. (another 1.3% before Singapore 10Y bonds go to zero %)
Dow Jones reported that WSJ reported that Singapore Emerges As Corporate Bond Hot Spot just a few hours ago.
Is it Suckerpore ? That shipping companies can convince the public that they have much more assets after deducting the lien-ed ones and the senior debt ? Photocopy machines maybe ?
I take this opportunity to beseech anybody from MAS who is reading this to posthaste, and start a study on retail recourse and hedge avenues, and keep an eye on excessive retail therapy.
And for goodness sake, if the market is growing so quickly, getting SGD corporates into global Credit Default Swap agreements is not a bad idea, is it ?
Just my opinion, of course… till the next Nameste bond coming this week…..
Reblogged this on singrates.
Most of the corporate bonds here are not rated, why?
A banker once told me that they they do not send to be rated by the rating agencies to save cost, is this true?
Would most of the corporate bond in the list above of investment grade or high yield if they are rated?
What is the default rate of singapore corporate bonds? They are 3% for US investment grade and 6% for high yield.
I believe Capitaland once got an “unsolicited rating” from Moodys or S&P, ie. they did not ask for the free rating. It was BBB and so I believe that they rejected it.
Not having a rating makes it less transparent.
Last default I remember was TT International. Before that was Bintan Lagoon debentures.
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Hi tradehaven, are the bintan lagoon debentures totally worthless now? I only recently remembered I have one of them from years ago.
I seriously thought all the debentures were restructured. Have to call up some old hands to get that info for you.
Be right back !