Bonds In Conversation : Dear John, Bond or Perp ?

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.


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.

sgd perp

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.