Bonds In Conversation : Scrapping the Bottom of the Yield Barrel
First big default I am hearing so far.
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.
would you be posting details of good bond issues when they come up?
Yes. Will try our best to. If it is useful to folks out there. But there is so much stuff to cover in so many currencies, I am just trying for SGD issues at the moment and some USD Asian stuff. Perhaps CNH if there is sufficient interest.
Hope everything is useful to you so far….
Have you heard about Suntech China bond possible default? They are asking for more time to repay bond holders and the china government is trying to prevent a default in China too.
Yes. You are right. It is a convertible bond. But likely govt takeover.
“The company said in a statement March 11 that about 60
percent of the bondholders had agreed to wait until May 15
before exercising their rights.”
Just like Chaori Solar last month.
“Feb. 22 (Bloomberg) — Shanghai Chaori Solar Energy Science
& Technology Co., a Chinese maker of solar cells, said it may
not be able to pay interest due March 7 to bond investors
because of liquidity difficulties.”
“March 3 (Bloomberg) — Shanghai Chaori Solar said it will
entrust the Shenzhen branch of the China Securities Depository
and Clearing to make an interest payment due on March 7 to bond
investors.
• All investors who hold the debt as of the end of March 6 are eligible to receive the payment, according to a statement to the Shenzhen Stock Exchange on March 2.
• Chaori Solar has 1 billion yuan of outstanding 5-year
debt that matures in March 2017.”
Hello Tradehaven – hope you are having a good weekend,
Ezra’s S$ 8.75% Perpetual has taken a heavy beating lately – I was quoted S$ 93.00 p.m. of last Thursday. It is due to pay its semi-annual dividend tomorrow, 18th March. I am wondering what has caused Ezra’s Perp to perform so much worse than Ezion’s and Swiber’s?? – all three are Singapore listed counters focused on the O&G services industry – all of these papers have decent step-ups in years to come. Looking at Ezra’s balance sheet, there is no doubting its weighty leverage ………….. but that also applies to Ezion, Swiber, Nam Cheong etc.?? My Ezion S$ Perpetual is holding on to par, yet has a coupon 95 bp’s lower than Ezra’s S$ Perpetual.
I’m obviously missing something.
Hi JC
This sector is quite close knit, if I may say so. Eg, Swiber majority shareholder was the ex Jaya MD and now a bunch of them ran over and re-listed a new one – Vallianz; the Ezion chairman has cross ownership in Ezra and Ezra owns a share of Ezion. It goes on.
Ezion is probably holding up the best at the moment because it has the least supply of bonds in the market.
Yet, I do not think banks distinguish between them too much and the worry for Swiber and Ezra at the moment is that private banks are only putting offers with NO BIDS (emphasised).
Just my opinion.
FYI, the liquidity of Swiber bonds is close to zero. Which means that there is practically no one trading it in the secondary market and the price holds. Do note that Swiber has the least amount of bonds in the market (if I’m not wrong)
Swiber has over $600 mio of outstanding bonds. Market Cap 390 mio.
Ezion has the least amount of bonds. SGD 225 mio, mkt cap 1.85 bio.
Most of these bonds are in retail hands, it would be hard to find institutional interest. Could be both a boon or bane being a PB or retail customer of the leads…
Yes. Most of these issues are PB deals. Like Nam Cheong – 73% went to PB.