Bonds In Conversation : Dear John, Bond or Perp ?

02/02/2013 by

Bond Sales Globally Reach Busiest January After Record Year : Bloomberg

But the biggest news of the week is probably the Reliance Industries USD Perpetual which tanked immediately upon issuance and never gave anyone a chance.

As if to rub salt into the wound, articles like this one comes out to mock buyers.

AMBANI LOWERS CAPITAL COST WITH RELIANCE PERPETUAL !!

The price has stabilised somewhat and the bond is trading at 97 price handle now after a low of 94-95.

Bond investors are not alone in Reliance. Perps around the world have taken hits this week in a very anemic marketplace. The situation has not turned chronic yet thus I am urging readers to learn abit more about that perp they have.

One perp is not another. And there is not a better time than NOW to start reading the fine print.

I am not about to give you a lesson on Make Whole clauses or poison puts but here is a rough details of the SGD Perps I could assemble in quite a hurry yesterday which, in case you did not notice, was a hell of a day particularly if you have been watching the fx screens.

If you just take a look at the list. OCBC 5.1% retail tranche is yielding close to nothing and possibly negative, God bless the stock market traders, for that is where it is traded. There is no re fixing at the call date which means you could be getting 5.1% for life if it does not call.

Another higher risk perp would be the OCBC 4% last year, with no re fixing at its call in Jan 2018, therefore it could be 4% non cumulative for life.

Safer perps would be the senior ones and I have to apologise for missing out the pioneer Senior Perp CheungKong 5.125% callable 09/2016 at 100 (current price 97.25/98.00, yield 5.25%) . This was the first of its kind on shore which was a nice bait to investors, assuring them of seniority in event of a default. Do note that seniority is still subordinated to secured bond/loan investors and in the case of banks, depositors.

Genting perp is something of an in between, with a fixed coupon refixing that does not compensate for potentially higher interest rates at the time of call and yet protecting the company from lower rates by giving them an option to redeem their papers at 100.

The main purpose of my emphasis on perps this week is a discovery that some retail clients are being aggressively marketed several subordinated papers at exorbitant prices and on high leverage, making the overall leveraged return look like a dream.

I do not advocate buying the Maybank perp at a 3 ct premium and at 60% leverage. That is quite unacceptable for risk taking and something I would not advise retail accounts to do.

Singapore government bond yields have risen sharply this week and the interest rate picture is looking pretty bleak. I did, however, buy a bond this week for myself. I bought myself the GE 4.5% AUD 5Y paper after leaving an order with my banker at 99.50. She kindly only took a 0.1 ct commission which made my cost 99.60.

Leaving you with the Olam price list as some of you have requested. Again, prices are not verified. The latest Olam 6.75 18 is holding up against higher interest rates, trading at a 1-2 ct discount to the issued price of 95cts.

OLAMSP 6 3/4 01/29/18	SGD	93.75	94.75
OLAMSP 6 10/25/22	SGD	90.75	93
OLAMSP 5 3/4 09/20/17	USD	92	93.5
OLAMSP 2 1/2 09/06/13	SGD	98.7	99.5
OLAMSP 5.8 07/17/19	SGD	92	94
OLAMSP 7 09/29/49	SGD	84	88
OLAMSP 6 08/10/18	SGD	94.5	96.5
OLAMSP 3 02/25/13	SGD	99.74	99.95
OLAMSP 7 1/2 08/12/20	USD	94.25	95.75
OLAMSP 4.07 02/12/13	SGD	99.6	100.05

Wishing you a good weekend and an old song I discovered on You Tube, goodness knows how my dear late mother even had its recording when she wasn’t even born yet.

Death to Defaults ! A Farcical Farce ! (tradehaven.me)

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50 thoughts on “Bonds In Conversation : Dear John, Bond or Perp ?”

tradehaven on 02/02/2013 at 10:33 AM said:

PS : There was a case of a Dutch bank SNS nationalisation on Friday. SNS has a SGD bond issued in 2007 – SNS 3.65 03/2027 for SGD 15 mio.
Peripheral bonds have taken a hit. ABN AMRO and Unicredito have widened as a result.
Do take note that these 2 banks have SGD issues which hit the street lately.

Oldfolk on 03/02/2013 at 6:46 AM said:

Hi tradehaven,

Really thankful for sharing with us your thoughts and insights on perps again. Mind if I just check with you, the second counter from the top in the list OCBC capital Corp 5.1% which is trading at 101.65 does it refer to the OTC tranche or the retail tranche? I have the impression that the retail tranche in SGX is trading around 108 – 109 range. Is the OTC tranche in denominations of 250K trading at 101.65 currently? Thank you so much.
- tradehaven on 03/02/2013 at 2:00 PM said:
  
  The SGX tranche is trading cum A.I. (accrued interest). Still that gives you a negative yield to call because cpn is 5.1% which means at most 2.6 cts (semi ann).
  Anything above 100 increases the chances of a call unless interest rates rocket by then which will make current bondholders poorer or unless OCBC is feeling particularly generous and charitable.
- Oldfolk on 04/02/2013 at 8:12 AM said:
  
  Hi tradehaven,
  I am sorry I am a bit confused as I am not experienced in this. Pls forgive me for asking this: I was thinking OCBC Capital Corporation 5.1% (second from top) call date is 2018, so in five years, I should have received estimated 25% coupon. So after deducting 9% extra which I pay now if it is trading at 109, shouldn’t I still make 16% or so over 5 yrs? Hence there is no negative yield to call?
  May I also seek your advise on Mapletree Treasure 5.125% and mapletree logistic trust 5.375% perpetuals. Do you happen to know am I correct to say mapletree treasure will refix its coupon in 10 yrs but mapletree logistic refix in 5 yrs, hence its better deal to get mapletree logistic 5.375%? Since interest rate is rising or expected to rise in few yrs so its more likely I get higher interest from mapletree logistic 5 yrs later but for mapletree treasure it will be stuck at 5.125 for ten yrs. Thank you in advance.
  - tradehaven on 04/02/2013 at 10:45 AM said:
    
    Sorry for the confusion.
    There are 2 OCBC 5.1% and both are traded on the stock exchange. The OCBC 5.1% min deno. 20k is callable in 2013 and its yield fluctuates between +ve and -ve since it is very close to call date.
    There is another OCBC Capital Corp 2008 callable in 2018 and at 109, it is giving 3.33% which is not that bad until you consider that there is no coupon refix on call date and you could be holding to the bond for life at 5.1%.
    Cannot compare Mapletree Treasury and Logistics because one is Temasek linked company and one is a Reit and they are both giving about 4.3-4.45% for 5Y and 10Y.
    Yes. If you are worried about the tenor then you should go for the Reit but they are different credits altogther.
Jim on 03/02/2013 at 11:57 AM said:

Read from financial news that the common bondholders’ investment were not affected from SNS nationalisation.
- tradehaven on 03/02/2013 at 2:03 PM said:
  
  Not sure if that is confirmed yet. Negotiations still pending if private investors will have to bear any cost because equity holders have lost everything. The rating agencies have threatened to download fellow dutch banks if bondholders are made to pay up. Tricky situation. Looks like hedge fund fodder to me.
- Jim on 04/02/2013 at 9:17 AM said:
  
  Hi Oldfolk,
  
  I’ve OCC 5.1% (OCBC Capital). However I think that the current premium at 109 is too high though I’m still holding on to it. I’m quite tempted to sell at current price.
  
  You may want to consider alternative DBS 4.7% (OTC-Oct 2020) currently trading around $104. I have bought some additional units last week in the secondary market. By the way, I’m still holding some 100K of the retail tranche allocated during placement.
- Oldfolk on 04/02/2013 at 6:09 PM said:
  
  Hi
  
  Many thanks tradehaven and Jim for sharing your useful thoughts and insights. I was thinking if comparing the two OTC bonds: OCC 5.1% (call 2018) – $101.65 and DBS 4.7% (call 2020) – 104, it is quite okay to take OCC 5.1% since the price is cheaper and I get 0.4% more every year?
  I have the impression that the Olam 2022 6% price has been dropping recently last 2 weeks from bid price around 92 to less than 90 now 🙁 The other Olam bonds were increasing though. I was wondering if this is going to be the trend that the gap will further widden.
  - tradehaven on 05/02/2013 at 11:31 AM said:
    
    Hi Oldfolk
    
    After witnessing this morning’s meltdown in Asian bonds. I wouldnt recommend either.
    And your OCBC 5.1% price looks a tad too low. Market looks more like 104.50/105.50 (4.19%/4%) to call. DBS 4.7% callable, I assume you are talking about the exchange traded one, is priced too high even with the accrued int involved. I personally do not like the DBS because there is no coupon refixing at the call date.
    
    Olam 6% 2022 is looking weak today at 90.00/92.00. This cannot be helped given the contagion from bond weakness everywhere and not Olam specific news.

RedBar on 02/02/2013 at 10:42 AM said:

0.1 ct basis point for commissions is great!

tradehaven on 02/02/2013 at 10:53 AM said:

Yes. Choose your banker wisely.
Jim on 05/02/2013 at 11:25 AM said:

Last check on OCC 5.1% yesterday was 105-106.50. In today’s strait times, the last done price indicated was 105.656.

Note that this OCC 5.1% issue unlike OCBC 5.1%, re-fix its’ coupon upon Sept 2018.

Before 20 September 2018: 5.1% a year
Thereafter: 3-month Singapore swap offer rate plus 2.5%
- tradehaven on 05/02/2013 at 10:11 PM said:
  
  Hi Jim
  
  The OCBC Cap Corp does look better if you are willing to live with around 4% yield for the next 5.5 years.
  What do you think of Genting retail tranche ? Like to hear your perspective.
  
  Rgds.
- Jim on 06/02/2013 at 10:54 AM said:
  
  Hi tradehaven,
  
  I was tempted to buy Genting retail tranche when it dropped to 97.xx last year. At current 104, there are better options. Retail fixed income is a real pain as there is not much choice. Personally I like your recommendation on Biosensor, decent dividends with short bond duration.
  
  Are you comparing OCC 5.1% to OCBC 5.1%.
  Definitely Yes!
  
  I do have slight preference for DBS 4.7% institutional tranche (104.00) over OCC 5.1% for its’ fixed coupon. I’m currently holding both issues.
  
  All our local banks perps do not come with step-up coupons & non-cumulative.
  If I’m correct, our local banks have redeemed all their perps upon callable dates, which I think is a very cool thing.
- Oldfolk on 06/02/2013 at 7:12 PM said:
  
  Many thanks to tradehaven and Jim for the very informative and insightful thoughts. Thank you so much. Pls forgive me if I sound really confused, can anyone be kind enough to let me know the second OCBC related counter in the table at starting of this post which trades at 101.65 and callable 2018 refers to which particular tranche? Is it a different one from the 105.656 quoted in ST few days earlier?
  
  Btw I noticed that some other perpetuals/bonds that has all the while been very stable seemed to be moving down too. Eg. Mapletree treasure 5.125, Mapletree logistics 5.375, GLP 5.5%, Cheung Kong 5.125% etc… Most are still above par except CK but I am wondering if the decline trend is expected to continue and if I should get out from them soon ASAP.
- Jim on 06/02/2013 at 9:41 PM said:
  
  Hi Oldfolk,
  
  I think 101.65 is for OCBC 5.1% (Jun 2013).
  The quote 105.656 is for OCC 5.1% (Sept 2018).
  OCC is OCBC Capital Corporation, this debt is guaranteed by OCBC Bank just like the former.
  
  I’ve already cut all my corporate perps, only left with local banks perps like OCC & DBS 4.7%.
  The rest are just straight corporate bonds.
- Oldfolk on 09/02/2013 at 7:43 AM said:
  
  Hi Jim, much thanks for your kind clarification on the 101.65 OCBC 5.1%. Btw do you happen to have Olam bonds too? Does anyone have any idea is it true that Temasek is now not the second largest shareholder but the major shareholder? Cuz according to yesterday’s Change of Control statement in Olam’s official website, Temasek has increased its stake further to 21% from 20% and KC is only holding 20.2%? Is that something positive for Olam’s bonds? Wonder what is the significance of this. Thank you.
  - tradehaven on 09/02/2013 at 11:27 AM said:
    
    As a former credit trader in a past life, Temasek’s stake says nothing unless they take out a 2 page ad in the Business Times guaranteeing Olam’s liabilities and commitments.
    And an interesting bit of trivia, the worst performing bond this year in the Asian invt grade category happens to be the Temasek 2042 (84 cts low?), for obvious reasons.
    I used to have get a kick out of arbitraging SGX bonds vs the OTC market because SGX bonds include accrued interest and used to be traded to the nearest cent instead of the 0.01 cent.
    The only hope for Olam now is for more retail folks to get into the game and buy because of their faith in Temasek as credit analysis will not work and there is little chance institutional investors will be buying more given so many other choices out there.
- Jim on 09/02/2013 at 11:06 AM said:
  
  Bonds selling pressure has eased, they have started to recover lost ground last Friday.
  
  Yes, this week I bought the new Olam 6.75% for 40% returns over 5 years.
  This is however not the main consideration. I like it because it is traded on SGX.
  
  SGX support is usually much stronger than OTC mkt. Just hope USD is not a major issue here as it is something new for USD debt traded on SGX.
  If it could be traded at 100 or above on primary mkt before 2014, it would definitiely help to lift the rest of the boats.
  - tradehaven on 09/02/2013 at 11:40 AM said:
    
    Pray for QE4.
- Jim on 09/02/2013 at 8:47 PM said:
  
  Retail tranche is much more popular with investors than OTC for good reasons:-
  Primarily for high liquidity & ease of trade.
  
  1. Allow trades in just small multiple of 1000s (not SGD250,000 or USD200,000)
  2. Real time live prices (This is a real pain for OTC mkt)
  3. Ease of entering & exiting your investment
  4. Narrow bid/ask price of 0.10 at all times as compared to OTC (usually 0.50 to 1.00)
  
  DBS 4.7% & Genting are good examples of OTC & SGX.
  Their price difference is $4 & $7 respectively.
  Accrued interest only account for less than $1 for DBS 4.7% & $2 for Genting.
- Oldfolk on 09/02/2013 at 10:01 PM said:
  
  Many thanks to Tradehaven and Jim for kindly sharing the useful thoughts and views. I am sorry I am really quite ill-informed about the bond market, kindly forgive me to be ask what is the special reason for Temasek 2042 price to decline more significantly than other investment graded bonds? Btw would Jim and tradehaven mind to share their views if it is advisable for someone holding the Olam OTC 6% 2022 paper to switch to the retail 6.75% USD paper? I first thought about switching cos if I switch I can lower my exposure to Olam bonds and yet not to make a signifcant overall loss if Olam stays intact 5 yrs later. If I reinvest just half of what I am left with after selling the OTC bond into the 6.75% retail issue, I may have a effective yield of about 3% or so I guess after including the loss due to the OTC bond after 5 yrs. It is really poor returns but in a way better than losing 25K straight if I just sell away the OTC bond now or live with the worry to lose 250K totally. I am wondering if one does such a switch, is this the right price to do the switch now? Currently I guess there is a 4% difference between the 6.75% retail bond and 6% OTC bond. Is this price difference expected to widen or become more narrow? Another worry is whether USD will depreciate wrt SGD in the next five years and if so what would be the projected depreciation. Thank you so much
- Jim on 11/02/2013 at 12:32 PM said:
  
  Hi Oldfolk,
  
  Based on previous experiences, the spread for new Olam 6.75% & Olam 6% should be wider than present 4% before 2014.
  
  Are you able to borrow USD at competitive rates of less than 1.5%pa.
  This would help to hedge your currencies by borrowing, investing & then return in USD.
- Oldfolk on 12/02/2013 at 4:20 AM said:
  
  Hi Jim many thanks for your sharing your thoughts and advices. I have so far not made any USD investments actually. I hope the fact that now Temasek is the major shareholder will somehow give investors more confidence in Olam and hence improve its OTC bonds too. Btw do you have any idea, am I correct that the Olam 6.75% USD issue is callable in 2 yrs ie Jan 29 2015? If so, are they going to redeem at 100 if called in 2015? You have any idea where I can find more details about this particular bond issue? Thank you so much.
  - tradehaven on 12/02/2013 at 11:14 AM said:
    
    Hey Oldfolk,
    
    Olam 6.75% is traded in retail lots(min USD1,000) on the SGX. Ask your stockbroker for details.
    Last price on SGX was 93.70/93.80 (issued at 95.00) callable at 103.375 on 29 Jan 2015 (which means it is possible this call will not be exercised unless the bond is trading at 103.375 then), callable again at 101.688 on 29 Jan 2016 and at 100 on 29 Jan 2017 before its final maturity date on 29 Jan 2018.
    I hope you are not making your investment decisions based on Hope but I wish you all the best.
    6 years 6.75% and another 6 cts in capital appreciation adds up to a decent >7% return per annum. Please seek proper financial advice based on your needs first.
    Good luck !
    PS : Btw, you have inspired me to write something for you.
- Jim on 12/02/2013 at 11:24 AM said:
  
  Hi Oldfolk, here you go:-
  
  Terms of Bonds
  
  Issue size – US$750mn due in 2018
  
  Issue price – US$0.95 for each US$1.00 of principal amount of bonds
  
  Maturity date – 5th anniversary from the date of issue of the bonds
  
  Interest rate – 6.75% per annum payable semi-annually in arrears on 29 January and 29 July of each year
  
  Bonds to be redeemed at 100 percent on maturity
  
  Bonds are callable by the Company at 103.375 percent of par including any accrued interest on or after the second anniversary of the bond
- Oldfolk on 13/02/2013 at 4:47 AM said:
  
  Much thanks for the detailed and complete information on the Olam 6.75% bond by Jim and Tradehaven. Thank you so much for Tradehaven’s latest new post on Olam too. If you do happen to have any advice for Olam bond holders do kindly share your insights – to sell , hold or switch. Hope things will be well and wish everyone has a prosperous and fruitful year ahead.

Barnes on 02/02/2013 at 1:18 PM said:

0.1% commission, that’s seem too good to be true? Unless you are really connected or private banking clients? I hated to say that I always feel that my bankers are always pulling a fast one on me.

RedBar on 02/02/2013 at 1:35 PM said:

Well, my banker certainly is; I am not even getting 0.1 despite being private banking customer. Tradehaven – care to share which bank ?
- tradehaven on 02/02/2013 at 2:03 PM said:
  
  I cannot advertise here and she will kill me if I let the cat out of the bag.
  I think 20 pips is decent and actually sometimes I am not sure if she is taking 10 or 20 or even more because she could also be crossing trades too.
tradehaven on 02/02/2013 at 2:01 PM said:

Hi Barnes,

Yes. Private banks usually cannot get away with too much. It is the retail clients who suffer.
I am also lucky that I am privileged to know some bond traders who update me on prices.
Give us a shout next time you want to buy something. May be able to give a price update before you lose your pants. haha

Best Rgds.
Jim on 03/02/2013 at 12:05 PM said:

I’m currently paying 0.2% for bond trades. Are you guys paying this rates regardless on the buy/sell amounts.

How about your borrowing cost & custodian fees. I don’t think I’m getting the best rates from my banker.
Understand that competitive fees are custodian fees 0.1% & borrowing cost could be 0.75%+Cost of Funds.
- tradehaven on 03/02/2013 at 2:04 PM said:
  
  0.2% yield or pips ? ie. if you buy at 5%, you will get 4.8% ? or just 99.80 vs 100.00 ?
  The latter is a decent deal.
  Your custodian fees and borrowing costs are good.
- Jim on 03/02/2013 at 4:36 PM said:
  
  It is 0.2% pips. If a new issue is 100.00, it would cost me 100.20 in total.
  
  I’ve not quite achieved the 0.1% custodian fees yet though I’ve managed to negotiate a max cap (Currently works out to be 0.1%).
  
  Cost of borrowings still working on it. Yet to strike 0.75% + Cost of Funds. I do understand that there are private banking clients paying these rates with relatively small fund size of only 1-2 mio investment.
  - tradehaven on 03/02/2013 at 5:34 PM said:
    
    Good luck and it would be good for you to know that some bonds are already issued with a PB rebate. Thus they can easily sell the bond at 100.00 to you at launch because there is already a commission involved. Most high yielders and perps come with this because they are relatively harder to sell typically. Yet now it appears to be the other case.
- Jim on 03/02/2013 at 7:29 PM said:
  
  thanks tradehaven, for your very useful information.
Jim on 12/02/2013 at 11:23 AM said:

Hi Oldfolk, here you go:-

Terms of Bonds

Issue size – US$750mn due in 2018

Issue price – US$0.95 for each US$1.00 of principal amount of bonds

Maturity date – 5th anniversary from the date of issue of the bonds

Interest rate – 6.75% per annum payable semi-annually in arrears on 29 January and 29 July of each year

Bonds to be redeemed at 100 percent on maturity

Bonds are callable by the Company at 103.375 percent of par including any accrued interest on or after the second anniversary of the bond

Barnes on 02/02/2013 at 4:43 PM said:

Tradehaven,

Thanks for your help! Yes, I definitely do not like to be caught with my pants down. Hehe

Any pricing info on Yanlord 9.5% USD 2017 would be really helpful.

Have a good weekend.

tradehaven on 03/02/2013 at 1:56 PM said:

Have to check tomorrow. Brb.

FID on 03/02/2013 at 4:46 PM said:

Barnes, Yanlord 9.5% USD 2017 was 104.5-105.5 on Friday

Barnes on 04/02/2013 at 5:07 PM said:

Thanks FID! The price is similar to what I have got from my banker too.

Tradeheaven, I was checking your GE AUD bond today and got the following 99.3 / 100.3. It seems like you really got a good deal at 99.6. It looks like your banker might be doing a cross trade like what you have suggested.

RedBar on 14/03/2013 at 12:21 PM said:

Hiya,

Any bond traders out there can help me with the bid/ask for the Raffles Edu 5.8% bond ? Any other interesting new issues you would recommend ?

tradehaven on 14/03/2013 at 12:40 PM said:

Seeing 100.25/100.75 out there.
- RedBar on 14/03/2013 at 1:01 PM said:
  
  Thanks Tradeheaven! No chance everyone can contribute some funds and put this service up online ? It would be great!
  - tradehaven on 14/03/2013 at 1:13 PM said:
    
    Working on it atm. Maybe next month.

Jz on 12/04/2013 at 2:11 AM said:

Hi tradehaven!

Bumped into this great site recently when doing a nonchalant google search on sgd corporate bonds. Have read many of the insightful articles listed in archives written by u. A sincere thank you!

Is there any bond trader there can help me check the current price of mapletree treasury 5.125% and mapletree logistic trust 5.375% perpetual bonds? Thanks in advance! Cheers!

tradehaven on 12/04/2013 at 9:01 AM said:

Hi Jz

I am seeing 103.25/104.625 (4.19/3.94% yield to call in 07/2017) for the Mapletree Treasury (unrated) perp. Not sure about the offer side because it looks like this bond is out of stock.

The Mapletree Log (rated Baa3) is at 105/105.375 (4.12/4.03% yield to call) and it looks like there could be bonds on offer.

Hope that helps.

Jz on 27/04/2013 at 2:03 AM said:

Hi tradehaven! All thanks to your reply on Mapletree Treasury bond price and YTC, i have managed to lock in one lot at 104.15 last week. *Bows*

I have read with great interest on the above conversation with regard to borrowing fund to purchase a bond.

– May i ask, wat is the maximum percentage of a bond value can i borrow?

– To clarify is the borrowing rate usually 3months SOR + 0.75%?

– For perpetual bonds, will the bank allow leverage of 60% or any leverage at all since there is no maturity date?

I apologizes for the noob questions… Hope someone shed some light and enlighten me! Thanks!

tradehaven on 27/04/2013 at 2:47 PM said:

Hi Jz

Leverage on bonds depends on the client’s and the bond’s credit worthiness to bank. I know some banks that are unwilling to give leverage on some names which others readily do so.
Max value as far as I am aware of should be 80%, same for housing loans. These are for the AA/Aaa bonds, stat boards, govis etc.
Borrowing rate depends on the client and what the bank is willing to lend at and you can choose any short term tenor from 1 week to 6mths I believe.
Some banks do not allow leverage for perpetuals yet I am aware that local security houses are giving quite a bit of leverage for some perps. At the same time, I noticed they marked up the bond price by 3 cts. ie. from 105 to 108. Desperate clients will be hostage to that especially if they cannot get that facility with their banks, setting themselves up for easy margin calls in the future.
Hope the information helps.

tradehaven on 02/02/2013 at 10:33 AM said:

PS : There was a case of a Dutch bank SNS nationalisation on Friday. SNS has a SGD bond issued in 2007 – SNS 3.65 03/2027 for SGD 15 mio.
Peripheral bonds have taken a hit. ABN AMRO and Unicredito have widened as a result.
Do take note that these 2 banks have SGD issues which hit the street lately.
- Oldfolk on 03/02/2013 at 6:46 AM said:
  
  Hi tradehaven,
  
  Really thankful for sharing with us your thoughts and insights on perps again. Mind if I just check with you, the second counter from the top in the list OCBC capital Corp 5.1% which is trading at 101.65 does it refer to the OTC tranche or the retail tranche? I have the impression that the retail tranche in SGX is trading around 108 – 109 range. Is the OTC tranche in denominations of 250K trading at 101.65 currently? Thank you so much.
  - tradehaven on 03/02/2013 at 2:00 PM said:
    
    The SGX tranche is trading cum A.I. (accrued interest). Still that gives you a negative yield to call because cpn is 5.1% which means at most 2.6 cts (semi ann).
    Anything above 100 increases the chances of a call unless interest rates rocket by then which will make current bondholders poorer or unless OCBC is feeling particularly generous and charitable.
  - Oldfolk on 04/02/2013 at 8:12 AM said:
    
    Hi tradehaven,
    I am sorry I am a bit confused as I am not experienced in this. Pls forgive me for asking this: I was thinking OCBC Capital Corporation 5.1% (second from top) call date is 2018, so in five years, I should have received estimated 25% coupon. So after deducting 9% extra which I pay now if it is trading at 109, shouldn’t I still make 16% or so over 5 yrs? Hence there is no negative yield to call?
    May I also seek your advise on Mapletree Treasure 5.125% and mapletree logistic trust 5.375% perpetuals. Do you happen to know am I correct to say mapletree treasure will refix its coupon in 10 yrs but mapletree logistic refix in 5 yrs, hence its better deal to get mapletree logistic 5.375%? Since interest rate is rising or expected to rise in few yrs so its more likely I get higher interest from mapletree logistic 5 yrs later but for mapletree treasure it will be stuck at 5.125 for ten yrs. Thank you in advance.
    - tradehaven on 04/02/2013 at 10:45 AM said:
      
      Sorry for the confusion.
      There are 2 OCBC 5.1% and both are traded on the stock exchange. The OCBC 5.1% min deno. 20k is callable in 2013 and its yield fluctuates between +ve and -ve since it is very close to call date.
      There is another OCBC Capital Corp 2008 callable in 2018 and at 109, it is giving 3.33% which is not that bad until you consider that there is no coupon refix on call date and you could be holding to the bond for life at 5.1%.
      Cannot compare Mapletree Treasury and Logistics because one is Temasek linked company and one is a Reit and they are both giving about 4.3-4.45% for 5Y and 10Y.
      Yes. If you are worried about the tenor then you should go for the Reit but they are different credits altogther.
- Jim on 03/02/2013 at 11:57 AM said:
  
  Read from financial news that the common bondholders’ investment were not affected from SNS nationalisation.
  - tradehaven on 03/02/2013 at 2:03 PM said:
    
    Not sure if that is confirmed yet. Negotiations still pending if private investors will have to bear any cost because equity holders have lost everything. The rating agencies have threatened to download fellow dutch banks if bondholders are made to pay up. Tricky situation. Looks like hedge fund fodder to me.
  - Jim on 04/02/2013 at 9:17 AM said:
    
    Hi Oldfolk,
    
    I’ve OCC 5.1% (OCBC Capital). However I think that the current premium at 109 is too high though I’m still holding on to it. I’m quite tempted to sell at current price.
    
    You may want to consider alternative DBS 4.7% (OTC-Oct 2020) currently trading around $104. I have bought some additional units last week in the secondary market. By the way, I’m still holding some 100K of the retail tranche allocated during placement.
  - Oldfolk on 04/02/2013 at 6:09 PM said:
    
    Hi
    
    Many thanks tradehaven and Jim for sharing your useful thoughts and insights. I was thinking if comparing the two OTC bonds: OCC 5.1% (call 2018) – $101.65 and DBS 4.7% (call 2020) – 104, it is quite okay to take OCC 5.1% since the price is cheaper and I get 0.4% more every year?
    I have the impression that the Olam 2022 6% price has been dropping recently last 2 weeks from bid price around 92 to less than 90 now 🙁 The other Olam bonds were increasing though. I was wondering if this is going to be the trend that the gap will further widden.
    - tradehaven on 05/02/2013 at 11:31 AM said:
      
      Hi Oldfolk
      
      After witnessing this morning’s meltdown in Asian bonds. I wouldnt recommend either.
      And your OCBC 5.1% price looks a tad too low. Market looks more like 104.50/105.50 (4.19%/4%) to call. DBS 4.7% callable, I assume you are talking about the exchange traded one, is priced too high even with the accrued int involved. I personally do not like the DBS because there is no coupon refixing at the call date.
      
      Olam 6% 2022 is looking weak today at 90.00/92.00. This cannot be helped given the contagion from bond weakness everywhere and not Olam specific news.
RedBar on 02/02/2013 at 10:42 AM said:

0.1 ct basis point for commissions is great!
- tradehaven on 02/02/2013 at 10:53 AM said:
  
  Yes. Choose your banker wisely.
- Jim on 05/02/2013 at 11:25 AM said:
  
  Last check on OCC 5.1% yesterday was 105-106.50. In today’s strait times, the last done price indicated was 105.656.
  
  Note that this OCC 5.1% issue unlike OCBC 5.1%, re-fix its’ coupon upon Sept 2018.
  
  Before 20 September 2018: 5.1% a year
  Thereafter: 3-month Singapore swap offer rate plus 2.5%
  - tradehaven on 05/02/2013 at 10:11 PM said:
    
    Hi Jim
    
    The OCBC Cap Corp does look better if you are willing to live with around 4% yield for the next 5.5 years.
    What do you think of Genting retail tranche ? Like to hear your perspective.
    
    Rgds.
  - Jim on 06/02/2013 at 10:54 AM said:
    
    Hi tradehaven,
    
    I was tempted to buy Genting retail tranche when it dropped to 97.xx last year. At current 104, there are better options. Retail fixed income is a real pain as there is not much choice. Personally I like your recommendation on Biosensor, decent dividends with short bond duration.
    
    Are you comparing OCC 5.1% to OCBC 5.1%.
    Definitely Yes!
    
    I do have slight preference for DBS 4.7% institutional tranche (104.00) over OCC 5.1% for its’ fixed coupon. I’m currently holding both issues.
    
    All our local banks perps do not come with step-up coupons & non-cumulative.
    If I’m correct, our local banks have redeemed all their perps upon callable dates, which I think is a very cool thing.
  - Oldfolk on 06/02/2013 at 7:12 PM said:
    
    Many thanks to tradehaven and Jim for the very informative and insightful thoughts. Thank you so much. Pls forgive me if I sound really confused, can anyone be kind enough to let me know the second OCBC related counter in the table at starting of this post which trades at 101.65 and callable 2018 refers to which particular tranche? Is it a different one from the 105.656 quoted in ST few days earlier?
    
    Btw I noticed that some other perpetuals/bonds that has all the while been very stable seemed to be moving down too. Eg. Mapletree treasure 5.125, Mapletree logistics 5.375, GLP 5.5%, Cheung Kong 5.125% etc… Most are still above par except CK but I am wondering if the decline trend is expected to continue and if I should get out from them soon ASAP.
  - Jim on 06/02/2013 at 9:41 PM said:
    
    Hi Oldfolk,
    
    I think 101.65 is for OCBC 5.1% (Jun 2013).
    The quote 105.656 is for OCC 5.1% (Sept 2018).
    OCC is OCBC Capital Corporation, this debt is guaranteed by OCBC Bank just like the former.
    
    I’ve already cut all my corporate perps, only left with local banks perps like OCC & DBS 4.7%.
    The rest are just straight corporate bonds.
  - Oldfolk on 09/02/2013 at 7:43 AM said:
    
    Hi Jim, much thanks for your kind clarification on the 101.65 OCBC 5.1%. Btw do you happen to have Olam bonds too? Does anyone have any idea is it true that Temasek is now not the second largest shareholder but the major shareholder? Cuz according to yesterday’s Change of Control statement in Olam’s official website, Temasek has increased its stake further to 21% from 20% and KC is only holding 20.2%? Is that something positive for Olam’s bonds? Wonder what is the significance of this. Thank you.
    - tradehaven on 09/02/2013 at 11:27 AM said:
      
      As a former credit trader in a past life, Temasek’s stake says nothing unless they take out a 2 page ad in the Business Times guaranteeing Olam’s liabilities and commitments.
      And an interesting bit of trivia, the worst performing bond this year in the Asian invt grade category happens to be the Temasek 2042 (84 cts low?), for obvious reasons.
      I used to have get a kick out of arbitraging SGX bonds vs the OTC market because SGX bonds include accrued interest and used to be traded to the nearest cent instead of the 0.01 cent.
      The only hope for Olam now is for more retail folks to get into the game and buy because of their faith in Temasek as credit analysis will not work and there is little chance institutional investors will be buying more given so many other choices out there.
  - Jim on 09/02/2013 at 11:06 AM said:
    
    Bonds selling pressure has eased, they have started to recover lost ground last Friday.
    
    Yes, this week I bought the new Olam 6.75% for 40% returns over 5 years.
    This is however not the main consideration. I like it because it is traded on SGX.
    
    SGX support is usually much stronger than OTC mkt. Just hope USD is not a major issue here as it is something new for USD debt traded on SGX.
    If it could be traded at 100 or above on primary mkt before 2014, it would definitiely help to lift the rest of the boats.
    - tradehaven on 09/02/2013 at 11:40 AM said:
      
      Pray for QE4.
  - Jim on 09/02/2013 at 8:47 PM said:
    
    Retail tranche is much more popular with investors than OTC for good reasons:-
    Primarily for high liquidity & ease of trade.
    
    1. Allow trades in just small multiple of 1000s (not SGD250,000 or USD200,000)
    2. Real time live prices (This is a real pain for OTC mkt)
    3. Ease of entering & exiting your investment
    4. Narrow bid/ask price of 0.10 at all times as compared to OTC (usually 0.50 to 1.00)
    
    DBS 4.7% & Genting are good examples of OTC & SGX.
    Their price difference is $4 & $7 respectively.
    Accrued interest only account for less than $1 for DBS 4.7% & $2 for Genting.
  - Oldfolk on 09/02/2013 at 10:01 PM said:
    
    Many thanks to Tradehaven and Jim for kindly sharing the useful thoughts and views. I am sorry I am really quite ill-informed about the bond market, kindly forgive me to be ask what is the special reason for Temasek 2042 price to decline more significantly than other investment graded bonds? Btw would Jim and tradehaven mind to share their views if it is advisable for someone holding the Olam OTC 6% 2022 paper to switch to the retail 6.75% USD paper? I first thought about switching cos if I switch I can lower my exposure to Olam bonds and yet not to make a signifcant overall loss if Olam stays intact 5 yrs later. If I reinvest just half of what I am left with after selling the OTC bond into the 6.75% retail issue, I may have a effective yield of about 3% or so I guess after including the loss due to the OTC bond after 5 yrs. It is really poor returns but in a way better than losing 25K straight if I just sell away the OTC bond now or live with the worry to lose 250K totally. I am wondering if one does such a switch, is this the right price to do the switch now? Currently I guess there is a 4% difference between the 6.75% retail bond and 6% OTC bond. Is this price difference expected to widen or become more narrow? Another worry is whether USD will depreciate wrt SGD in the next five years and if so what would be the projected depreciation. Thank you so much
  - Jim on 11/02/2013 at 12:32 PM said:
    
    Hi Oldfolk,
    
    Based on previous experiences, the spread for new Olam 6.75% & Olam 6% should be wider than present 4% before 2014.
    
    Are you able to borrow USD at competitive rates of less than 1.5%pa.
    This would help to hedge your currencies by borrowing, investing & then return in USD.
  - Oldfolk on 12/02/2013 at 4:20 AM said:
    
    Hi Jim many thanks for your sharing your thoughts and advices. I have so far not made any USD investments actually. I hope the fact that now Temasek is the major shareholder will somehow give investors more confidence in Olam and hence improve its OTC bonds too. Btw do you have any idea, am I correct that the Olam 6.75% USD issue is callable in 2 yrs ie Jan 29 2015? If so, are they going to redeem at 100 if called in 2015? You have any idea where I can find more details about this particular bond issue? Thank you so much.
    - tradehaven on 12/02/2013 at 11:14 AM said:
      
      Hey Oldfolk,
      
      Olam 6.75% is traded in retail lots(min USD1,000) on the SGX. Ask your stockbroker for details.
      Last price on SGX was 93.70/93.80 (issued at 95.00) callable at 103.375 on 29 Jan 2015 (which means it is possible this call will not be exercised unless the bond is trading at 103.375 then), callable again at 101.688 on 29 Jan 2016 and at 100 on 29 Jan 2017 before its final maturity date on 29 Jan 2018.
      I hope you are not making your investment decisions based on Hope but I wish you all the best.
      6 years 6.75% and another 6 cts in capital appreciation adds up to a decent >7% return per annum. Please seek proper financial advice based on your needs first.
      Good luck !
      PS : Btw, you have inspired me to write something for you.
  - Jim on 12/02/2013 at 11:24 AM said:
    
    Hi Oldfolk, here you go:-
    
    Terms of Bonds
    
    Issue size – US$750mn due in 2018
    
    Issue price – US$0.95 for each US$1.00 of principal amount of bonds
    
    Maturity date – 5th anniversary from the date of issue of the bonds
    
    Interest rate – 6.75% per annum payable semi-annually in arrears on 29 January and 29 July of each year
    
    Bonds to be redeemed at 100 percent on maturity
    
    Bonds are callable by the Company at 103.375 percent of par including any accrued interest on or after the second anniversary of the bond
  - Oldfolk on 13/02/2013 at 4:47 AM said:
    
    Much thanks for the detailed and complete information on the Olam 6.75% bond by Jim and Tradehaven. Thank you so much for Tradehaven’s latest new post on Olam too. If you do happen to have any advice for Olam bond holders do kindly share your insights – to sell , hold or switch. Hope things will be well and wish everyone has a prosperous and fruitful year ahead.
Barnes on 02/02/2013 at 1:18 PM said:

0.1% commission, that’s seem too good to be true? Unless you are really connected or private banking clients? I hated to say that I always feel that my bankers are always pulling a fast one on me.
- RedBar on 02/02/2013 at 1:35 PM said:
  
  Well, my banker certainly is; I am not even getting 0.1 despite being private banking customer. Tradehaven – care to share which bank ?
  - tradehaven on 02/02/2013 at 2:03 PM said:
    
    I cannot advertise here and she will kill me if I let the cat out of the bag.
    I think 20 pips is decent and actually sometimes I am not sure if she is taking 10 or 20 or even more because she could also be crossing trades too.
- tradehaven on 02/02/2013 at 2:01 PM said:
  
  Hi Barnes,
  
  Yes. Private banks usually cannot get away with too much. It is the retail clients who suffer.
  I am also lucky that I am privileged to know some bond traders who update me on prices.
  Give us a shout next time you want to buy something. May be able to give a price update before you lose your pants. haha
  
  Best Rgds.
- Jim on 03/02/2013 at 12:05 PM said:
  
  I’m currently paying 0.2% for bond trades. Are you guys paying this rates regardless on the buy/sell amounts.
  
  How about your borrowing cost & custodian fees. I don’t think I’m getting the best rates from my banker.
  Understand that competitive fees are custodian fees 0.1% & borrowing cost could be 0.75%+Cost of Funds.
  - tradehaven on 03/02/2013 at 2:04 PM said:
    
    0.2% yield or pips ? ie. if you buy at 5%, you will get 4.8% ? or just 99.80 vs 100.00 ?
    The latter is a decent deal.
    Your custodian fees and borrowing costs are good.
  - Jim on 03/02/2013 at 4:36 PM said:
    
    It is 0.2% pips. If a new issue is 100.00, it would cost me 100.20 in total.
    
    I’ve not quite achieved the 0.1% custodian fees yet though I’ve managed to negotiate a max cap (Currently works out to be 0.1%).
    
    Cost of borrowings still working on it. Yet to strike 0.75% + Cost of Funds. I do understand that there are private banking clients paying these rates with relatively small fund size of only 1-2 mio investment.
    - tradehaven on 03/02/2013 at 5:34 PM said:
      
      Good luck and it would be good for you to know that some bonds are already issued with a PB rebate. Thus they can easily sell the bond at 100.00 to you at launch because there is already a commission involved. Most high yielders and perps come with this because they are relatively harder to sell typically. Yet now it appears to be the other case.
  - Jim on 03/02/2013 at 7:29 PM said:
    
    thanks tradehaven, for your very useful information.
- Jim on 12/02/2013 at 11:23 AM said:
  
  Hi Oldfolk, here you go:-
  
  Terms of Bonds
  
  Issue size – US$750mn due in 2018
  
  Issue price – US$0.95 for each US$1.00 of principal amount of bonds
  
  Maturity date – 5th anniversary from the date of issue of the bonds
  
  Interest rate – 6.75% per annum payable semi-annually in arrears on 29 January and 29 July of each year
  
  Bonds to be redeemed at 100 percent on maturity
  
  Bonds are callable by the Company at 103.375 percent of par including any accrued interest on or after the second anniversary of the bond
Barnes on 02/02/2013 at 4:43 PM said:

Tradehaven,

Thanks for your help! Yes, I definitely do not like to be caught with my pants down. Hehe

Any pricing info on Yanlord 9.5% USD 2017 would be really helpful.

Have a good weekend.
- tradehaven on 03/02/2013 at 1:56 PM said:
  
  Have to check tomorrow. Brb.
FID on 03/02/2013 at 4:46 PM said:

Barnes, Yanlord 9.5% USD 2017 was 104.5-105.5 on Friday
Barnes on 04/02/2013 at 5:07 PM said:

Thanks FID! The price is similar to what I have got from my banker too.

Tradeheaven, I was checking your GE AUD bond today and got the following 99.3 / 100.3. It seems like you really got a good deal at 99.6. It looks like your banker might be doing a cross trade like what you have suggested.
RedBar on 14/03/2013 at 12:21 PM said:

Hiya,

Any bond traders out there can help me with the bid/ask for the Raffles Edu 5.8% bond ? Any other interesting new issues you would recommend ?
- tradehaven on 14/03/2013 at 12:40 PM said:
  
  Seeing 100.25/100.75 out there.
  - RedBar on 14/03/2013 at 1:01 PM said:
    
    Thanks Tradeheaven! No chance everyone can contribute some funds and put this service up online ? It would be great!
    - tradehaven on 14/03/2013 at 1:13 PM said:
      
      Working on it atm. Maybe next month.
Jz on 12/04/2013 at 2:11 AM said:

Hi tradehaven!

Bumped into this great site recently when doing a nonchalant google search on sgd corporate bonds. Have read many of the insightful articles listed in archives written by u. A sincere thank you!

Is there any bond trader there can help me check the current price of mapletree treasury 5.125% and mapletree logistic trust 5.375% perpetual bonds? Thanks in advance! Cheers!
- tradehaven on 12/04/2013 at 9:01 AM said:
  
  Hi Jz
  
  I am seeing 103.25/104.625 (4.19/3.94% yield to call in 07/2017) for the Mapletree Treasury (unrated) perp. Not sure about the offer side because it looks like this bond is out of stock.
  
  The Mapletree Log (rated Baa3) is at 105/105.375 (4.12/4.03% yield to call) and it looks like there could be bonds on offer.
  
  Hope that helps.
Jz on 27/04/2013 at 2:03 AM said:

Hi tradehaven! All thanks to your reply on Mapletree Treasury bond price and YTC, i have managed to lock in one lot at 104.15 last week. *Bows*

I have read with great interest on the above conversation with regard to borrowing fund to purchase a bond.

– May i ask, wat is the maximum percentage of a bond value can i borrow?

– To clarify is the borrowing rate usually 3months SOR + 0.75%?

– For perpetual bonds, will the bank allow leverage of 60% or any leverage at all since there is no maturity date?

I apologizes for the noob questions… Hope someone shed some light and enlighten me! Thanks!
- tradehaven on 27/04/2013 at 2:47 PM said:
  
  Hi Jz
  
  Leverage on bonds depends on the client’s and the bond’s credit worthiness to bank. I know some banks that are unwilling to give leverage on some names which others readily do so.
  Max value as far as I am aware of should be 80%, same for housing loans. These are for the AA/Aaa bonds, stat boards, govis etc.
  Borrowing rate depends on the client and what the bank is willing to lend at and you can choose any short term tenor from 1 week to 6mths I believe.
  Some banks do not allow leverage for perpetuals yet I am aware that local security houses are giving quite a bit of leverage for some perps. At the same time, I noticed they marked up the bond price by 3 cts. ie. from 105 to 108. Desperate clients will be hostage to that especially if they cannot get that facility with their banks, setting themselves up for easy margin calls in the future.
  Hope the information helps.

TradeHaven