Bonds In Conversation : Obsessing With Size
This will be the start of a series of weeklies on the SGD bond scene. Do keep the feedback coming.
I decided to drag out all the benchmark issues of this year and see how profitable they have been for investors. Behold the riches of our fellow men.
These 39 issues total some SGD 18.84 bio, approximately 70% of total bonds issued this year. They include the largest ever single issue in SGD, the Genting Singapore PLC perpetual bond for SDG 1.8 billion.
Looking at the table, I guess we can conclude that big issues do not seem to be holding up as well as the smaller ones.
For instance, Genting has made SGD 22.5 million dollars off the street for their perpetual which is bid at 98.75 now. That means that if they were to issue that very same bond now, they would have to cough up the extra SGD 22.5 million in yield for it.
Other than the exceptions of Genting and some of the Keppel issues, the rest of the papers are holding up reasonably well. In fact, netting a total profit of > SGD 100 million. This works out to a 5.67% average return on the year.
Pretty remarkable if you ask me because if you had bought the Dow Jones for the year, you would be only up 4.3% versus the SGD dollar.
That is, assuming you take profit on your holdings.
This would be useful as getting the bonds pricing is not easy. Would be interesting to see how are the recent high coupon rate ones are doing. Understand that demand has been strong in the present low yield environment and strong sgd.
Working on it.
Thank you very much, tradehaven.
It has been most frustrating since I was coerced into buying one of these corporate bonds. Many times when I asked my banker for a bid quote, it takes more than 3-4 hours later to get a response. Needless to say, the price is not good enough to get out as it is a loss making position.
Your news about posting the corporate bond prices weekly is going to take away my agony of checking the price with them now and then. Can I clarify if the last bid price you displayed is that of inter-bank?
Thank you, Gillian
Dear Gillian,
I have to qualify that these prices are not firm. They were downloaded from various price sources which I cannot vouch are accurate. But I did do a brief sanity check on them and they look acceptable, to my knowledge.
I wouldn’t like to cause any dispute between yourself and your banker in case of a disagreement on your mark to markets.
Final advice : your banker works for you and not vice versa and they are a dime a dozen these days.
Thanks for the feedback and comments. Please keep them coming.
Good luck !
Tradehaven,
Came across your post for the first time today and I have to say, both thumbs up!
I started to invest in the fixed income market early this year after my doctor told me that my heart cannot take those volatile market swings anymore.
As you can see, so far so good… The returns on my bonds portfolio is at least 8% if I take profits now.
What are your views on the fixed income market for the next 12 months? Should I take my profits now? The problem is I do not know where to invest if I take profits now.
Hi,
8% returns sounds good. Is it leveraged or unleveraged ?
If it will continue to deliver 8% annually, then you should be congratulating yourself because that is better than most REITS.
However, if it is based on capital gains on the bond price, then that would be eroded if you held the bond to maturity.
My view of the Singapore fixed income market for the next 12 months is that it would be supported as far as interest rates are concerned and interest rates will remain suppressed onshore.
Credit quality, however, is subjective to global market conditions. We have not seen a major credit blowout since Lehman due to the ample supply of liquidity in the system but credit remains dicey particularly if a major corporate failure were to occur for various reasons.
I remain skeptical of the viability of some of the high yield names around which have tightened alot in the mad grab for yield.
Hope it helps.
Hi Tradehaven
Nice info here. However for a beginner like me, where should I start? Some of the terms you mentioned sounds foreign and I need some recommended resource to catch up.
For example, when the rates of returns are calculated, are they based purely on the difference between issue and sale price or do coupons come into play as well.
Thanks in advance!
Hi Aaron
Thanks. We are working on something for you. Should be ready soon.
Rates of returns usually take into account everything. So it looks good.