Bonds In Conversation : Chatter On The Street
Hello 2013, Goodbye Patti Page.
2013 opens to a US Treasury sell off of about 8 bp to 1.84% in the 10Y bond, that is just 9 bp shy of its 3 Jan 2012 opening level of 1.95% and 50 bp above its low yield of 1.38% attained in Jul 2012.
By all measures, Singapore rates have outperformed US rates. The 10Y SGD government bond yield is still 1.34% after opening 2012 at 1.64%.
Sifting through the noise on the street which is mostly headlines on the fiscal cliff save this week, the rhetoric has been increasingly bond negative. We do not have to worry about an avalanche yet, not especially when we are going to have austerity in 3 of the 4 largest economies in the world. US – spending cuts from fiscal cliff, Eurozone and China – austerity drive. That leaves only Japan to spend. Technically, less spending means less debt and less growth and thus, lower rates ?
I got to admit, I am not very bullish on credits and corporate bonds this year. So I will better keep my mouth shut while writing a credit column.
OCBC published an useful little guide on SGD credits yesterday. I did a little summary table for their credit calls for the readers.
| Ascendas Real Estate Investment Trust | overweight |
| Ascott Residence Trust | overweight |
| CapitaLand Ltd | overweight |
| CapitaMalls Asia Ltd | neutral |
| CapitaCommercial Trust | neutral |
| CapitaMall Trust | underweight |
| Central China Real Estate Ltd | neutral |
| Cheung Kong Holdings Ltd | overweight |
| City Developments Ltd | neutral |
| Ezion Holdings Ltd | neutral |
| Ezra Holdings Ltd | underweight |
| Frasers Centrepoint Trust | underweight |
| Genting Singapore Plc | neutral |
| Global Logistic Properties Ltd | neutral |
| Goodpack Ltd | overweight |
| GuocoLand Ltd | underweight |
| Henderson Land Development Company Ltd | overweight |
| Hongkong Land Holdings Ltd | underweight |
| Hotel Properties Ltd | overweight |
| Hyflux Ltd | underweight |
| Keppel Corp Ltd | neutral |
| Keppel Land Ltd | overweight |
| Mapletree Commercial Trust | overweight |
| Mapletree Industrial Trust | underweight |
| Mapletree Logistics Trust | underweight |
| Nam Cheong Ltd | overweight |
| Neptune Orient Lines Ltd | underweight |
| Olam International Ltd | overweight |
| Overseas Union Enterprise Ltd | underweight |
| Shui On Land Ltd | underweight |
| Singapore Post Ltd | overweight |
| Starhill Global Real Estate Investment Trust | neutral |
| Suntec Real Estate Investment Trust | neutral |
| Swiber Holdings Ltd | underweight |
| United Engineers Ltd | neutral |
| The Wharf (Holdings) Ltd | underweight |
| Wheelock & Co Ltd | overweight |
| Wing Tai Holdings Ltd | overweight |
| Wing Tai Properties Ltd | neutral |
First, I do not understand what overweight, underweight and neutral means in the context of bonds. I will just suppose it means buy relative to another bond and not load up on the bond. Second, I am not cheering for any calls. In fact, I see little cheer at all with a bunch of bond recommendations asking investors to buy papers at miserably sad yields.
But ask ourselves, would any report you read be a bad one ?
My understanding is simple if you are an equity analyst or a bond analyst. You cannot ask customers to buy rice when you are selling bread. And I am sure there is a more elegant way of putting it.
What is the chatter these days ?
| NYTimesglobal | Big in 2012, but the Future Is Hazy for Bonds |
……..
When I started writing this yesterday, I did not expect bonds to sell off so much in one day and the curve to steepen so much. The purge has begun.
My view is that the USD/SGD will head to 1.26 before April which will lead to a mini bond stampede before the 30Y auction slated for end Feb. The saving grace is that MAS will be flushing liquidity in the short end to keep the short end rates lower but will be largely helpless to higher long term rates.
Thus 10Y rate is at 1.90% now which means all the 10Y papers issued July-Aug and Oct-Dec will be under water. If you cannot find a decent bid, there are various indirect hedges you could deploy.
* sell US 10Y treasuries via an ETF or CFD ( TBT US for 20Y, PST US for 7-10Y, do note that these are double leveraged ETFs)
* buy USDSGD to hedge an outflow from Singapore
* buy GOLD for inflationary hedge (in this case, inflation is not the real concern)
* pay 10Y irs if you have a private account
In conclusion, the OCBC piece is great to help us choose but it does not tell us that we cannot buy because rates are just headed higher after a 5 year hiatus of zero rates.
| LAST | LOWEST | ||
| OLAMSP 6 10/25/22 | SGD | 91.50 | 81.48 |
| OLAMSP 5 3/4 09/20/17 | USD | 96.50 | 83.98 |
| OLAMSP 2 1/2 09/06/13 | SGD | 97.75 | 95.99 |
| OLAMSP 5.8 07/17/19 | SGD | 91.77 | 82.31 |
| OLAMSP 7 09/29/49 | SGD | 85.00 | 75.44 |
| OLAMSP 6 08/10/18 | SGD | 92.50 | 15.78 |
| OLAMSP 3 02/25/13 | SGD | 99.50 | 97.48 |
| OLAMSP 7 1/2 08/12/20 | USD | 97.34 | 84.33 |
| OLAMSP 4.07 02/12/13 | SGD | 99.50 | 80.96 |
All need advise – on the best Sec bond platform for retail investors in SGP – Pricing, response etc
Hi Roby
Retail bonds <250k are available on the SGX. There is only a handful of them available.
As for the typical SGD corporate bond with min. deno. of 250k, there is no generic platform unless you have access to the electronic platforms of banks such as Autobahn (Deutsche), Barclays, DBS etc. But those are for corporate customers.
Thus you have to go through the OTC market via your usual banker where there is no guarantee of a bid or offer price.
The active players are DBS, OCBC, SCB, HSBC, UBS, CSFB, Barclays, Deutsche and a few others.
Pricing depends on how they view your level of sophistication and how much they can "rip" off you which could be 20 cts to 2 dollars….
Hope that answers your question.
Hi tradeheaven,
Could you advise me where to get the live price or chart of singapore corporate bonds if i do not subscribe to any professional price feeds ? ( or any best alternative for any website which is free). Wish to know the price and chart for this Olam bond OLAMSP 6 10/25/22
Hi RoyC
No channel available for retail. There is an MAS Corporate Fixing Page on Bloomberg that published the price of this bond and is free to users if you have a Bloomberg account. Its SGDC.
Current price I see is 90.00/93.00.
We are currently working on something to help you ;).
Good luck in the meantime.
Hi there! Chances upon your website since middle of last year and I got to say its my favorite site for localized content. May I be so bold to ask if you may be a tad too pessimistic on the markets especially sgd bond issues? Granted interbank rates are as low as they are and the only way is up from here. And a whole bunch of reasons u stated I fully agree. But reading some of the comments I feel your readers may also fall in a class where no matter how miserable the yields may get they still have to deploy funds somewhere. If equities are ruled out cos of risk, bonds may work in a case if investor ok with a new IPO issue and buy at par for a short medium term tenor bond as long they dont leverage and willing yo bold till maturity. Pls do not get me wrong I have the highest regard for your views, just that it will be good to suggest what may be a better alternative. To a great 2013 for everyone cheers!
Hi Daniel
You are absolutely right. Someone has to be the sourpuss sometime.
Since most of the reports that the retail segment gets from their bankers would tend to be the “rosy” ones, I thought it would be good to have a sanity from neutral ground.
My investment strategy is not the best in the world and having this little blog is mostly for me to understand myself a little better as well.
Will take your feedback to suggest better alternatives but let me tell you what my main gripe is.
Inflation (CPI) vs 10Y bond yield is usually a good rule of thumb for investment decisions.
Singapore’s CPI (even if we use core CPI of 2%) is miles above 10Y bond yields and also the base CPF rate of 2.5%. I just cannot bring myself to cheer on my friends to invest under such circumstances, even though it is the new normal.
A great 2013 to you !!
Hi Tradehaven,
Could you kindly advise on what is the procedure to get the Bloomberg account and how much is the subscription in order to see the bond price in the MAS Corporate fixing page? Thank you for trying to work out something to help us. Thank you!
Bloomberg account USD1.9k a month and you will be able to see the bond price which is not a “live” price.
Last price I see today is still 90.00/93.00 but I think some places are paying up to 92.00.
prudential selling US $ perpetual at around 6%. You think it is worth a good look?
Joe
Not even close to 6%. Books over 15 bio I heard and the coupon cut down to closer to 5.25%.
Cannot bring myself to buy and stopped looking when the coupon indication fell under 5.5%.