Bonds In Conversation : Asia Crisis 1998 ? Or SARS 2003 ?
Now where was I then ?
The 2 big headlines dominating the week has been Japan with mild comparisons to the 1998 crisis; and bird flu in China which is compared to the 2003 SARS outbreak. Minor rumblings and grumblings on the authenticity of China’s economic data as well as the new fad of bitcoins which can be used to buy Ferraris, or so I have read.
That let the bond market rally go quite unnoticed with a spate of issuances globally, including good old Singapore who saw 5 smallish issues, namely Swiber 7.125% 4Y (160 mio), MCT 3.2% 8Y (70 mio), Goodpack 4.7% 10Y (50 mio) and HPL 3.9% 7Y (50 mio) and CWT 3.9% 6Y (100 mio).
All performed well on pent up market demand, with prices holding above par.
An interesting question that has sprung to mind is this. Is the world suffering a crisis in recovery or a recovery from crisis ?
The mood seems to be holding up but the uncertainty is really catching on, as evidenced in the erratic central banking behaviour that has taken centrestage over politicians. By that I am referring to the sudden global obsession with the BoJ and that the quadrillion yen that they have promised to inject to be hitting all shores abroad soon. So we have fast money, greedy money, retail money all falling over themselves, convinced that it will be ultimate QE coming on board.
So we have a rally on bad news and a bigger rally on good news, like in the case of the Australian unemployment today, a missed number and yet ASX closing higher. The market nonchalant to the China local debt rating downgrade by Fitch with astounding demand for the new USD CNPC deal. Market torn asunder with Bill Gross raising his US treasury holdings to highest level since July but Blackrock seeing no way to make money from sovereign debt.
I give up. I was there in 1998. Nobody knew what was going on then too. It took them a few years to figure that out.
Table of 2013 Public Issues (left out Tata International because it does not seem to be trading)
Olam Prices
2012 Benchmark Issues (Note : Prices not verified)
Looking back, I am very glad that I was not bearish. Slowly but surely, things are getting better. People are getting jobs in the US, Japan is printing money and China seems to be quietly switching to a consumption market. So its Goldilocks economy again?
Looking ahead, I am not so sure. Europe is taking a break, I doubt the problems have gone away. Sure Spain and Greece has a current account surplus which is attributed to exports (I didn’t know Greece exported anything. I reckon it is due to them have no money to buy anything…) and Spainish rates are near its lows. However, this does not mean that the crisis is over. There was no resolution at all. How quickly the market forgets simply amazes me. (or distracted. Maybe they paid Mr. Kim to play with his missiles??? =P)
In the US, effects of sequestration will probably be a drag on the economy. Although the budget cut is a drop in the water in the grand scheme of things, the job losses will be felt. If not resolved, you can expect the job loss to be a small drag on the economy.
And don’t get me started on the Basel 3. Basel 3 will force bank to bulk up on capital AND liquidity. Liquidity is serverly underpriced and poorly understood, unfortunately. Both will restrict the ability of banks to finance.
Time to take off your rose coloured glasses.
Hi again, which straight / perps SGD bonds will you recommend me to buy in the current market? I am looking at min 5 years and max 8 years for straight bonds. For perps, no particular preference. Risk wise, i would be more comfortable with blue chips / semi blue chips.
Hope you can give me some advice!
Blue chips and yield are inversely correlated.
yeah definitely.. seems like not much good bonds that fall into my category.. i didnt have access to the full list of bonds available so I hope someone can help me out.
List of perps for your info.
DBS CAPITAL FUNDING II 5.75% 29May49
OVERSEA-CHINESE BANKING 5.1% 29Dec49
MALAYAN BANKING BHD 6% 29Aug49
OCBC CAPITAL CORP 2008 5.1% 29Aug49
UNITED OVERSEAS BANK LTD 5.05% 29Sep49
DBS BANK LTD/SINGAPORE 4.7% 31Oct49
DBS BANK LTD/SINGAPORE 4.7% 31Oct49
HYFLUX LTD 6% 29Apr49
CK BOND SEC LTD 5.125% 29Sep49
CK BOND SEC LTD 5.125% 29Sep49
GLOBAL LOGISTIC PROPERTI 5.5% 28Dec49
GLOBAL LOGISTIC PROPERTI 5.5% 28Dec49
OLAM INTERNATIONAL LTD 7% 29Sep49
SINGAPORE POST LIMITED 4.25% 29Sep49
GENTING SINGAPORE PLC 5.125% 29Mar49
MAPLETREE LOGISTICS TRUS 5.375% 19Mar49
ASCENDAS PTE LTD 4.75% 18Oct49
GENTING SINGAPORE PLC 5.125% 29Oct49
HOTEL PROPERTIES LTD 6.125% 29May49
OVERSEA-CHINESE BANKING 4% 29Dec49
MAPLETREE TREASURY SVCS 5.125% 29Jul49
EZION HOLDINGS LTD 7.8% 29Sep49
I cannot confirm if this is the full list.
Thanks for the list! Do you have any recommendations for perps or straight bonds?
Hi Newbie
Not licensed to recommend anything.
Maybe if you have a particular bond in mind or a list of axes you got from your banker, we are see if they are value for money.
Best regards.
You might pick up something from the secondary market if prices are right (depending how much your banker want ps to rip you )
The usual suspects :
1) DBS 5.75
2) GLP 5.5
3) OCBC 5.1
looking at unicredit.. any thoughts? not sure if it is risky…
That bond is tricky.
1. Actual price is much lower than the published day end price of 96. (hearing the street is 1-2 bucks lower)
2. The loss absorption exemption is only valid under Italian law and not enforceable for most of Europe.
by the way, what is the YTC for DBS 5.75? It is callable on 2018 right?
Hihi
It looks like 3.73% 109.40 on the offer.
Callable in 06/2018.
Good luck !
Thanks for the info! i will avoid unicredit for now.. personally i feel that it is not worth taking the risk.