Bonds In Conversation : Scrapping the Bottom of the Yield Barrel

First big default I am hearing so far.

SEOUL, March 13 (Yonhap) — A company involved in South Korea’s largest-ever urban development project failed to pay back debts worth 5.9 billion won (US$5.3 million), company officials said Wednesday, raising concerns over the collapse of the 30-trillion-won project.

Not thinking much about it although Greek troika talks have broken down again. Junk-bond funds worldwide reported $1.9 billion of deposits last week, the most this year, even as gains are slowing.

Moodys sees global speculative-grade (junk) default rate this year at 2.7% vs 2.1% at this time last year, still well below the historical average of 4.7%. The Moodys global distressed index is 9.5% as of Feb vs 19.3% a year ago. The bond market has only seen 11 defaults so far this year, the most notable being SNS Bank N.V. last month.

I am starting to wonder why the big rush ? Investors are treating BUY as the only option which is a trifle disconcerting and responsible for driving dim sum junk yields to an 18 month low even when seasoned hands like Pimco and Blackrock are urging caution.

Looks like buyers are scrapping the barrel in the yield buckets now as moms and pops exit stocks and we are seeing the first outflows out of the S&P 500. So into 3Y paper they all pile.

I have had this surreal feeling many times before. Since BUY is not my preferred option, and fully invested I need not be, I will opt for my favourite pose, Do Nothing.

Leaving you with some of the new issue prices, Olam and the big ones from last year. (All unverified.)



Note the Olam USD 6.75% retail tranche is quoting at clean price where as the SGX prices have the accrued interest included.

sgs corps