Bonds In Conversation : Reflecting On The Great Exit
Warren Buffet‘s Berkshire Hathaway Finance just came out to issue a 5Y and 30Y bond at 1.3% and 4.3%. No wonder he would not buy Apple bonds because Apple issued their 5Y at 1% ! But it says something. That money does not get any cheaper than this.
“the second-richest American said at the meeting he has empathy for savers who depend on bond interest.”
“Buffett’s views on current interest rates are pretty clear,” said Richard Cook, co-founder of Cook & Bynum Capital Management LLC in Birmingham, Alabama, which oversees about $270 million including Berkshire shares. “Berkshire issuing debt is effectively an efficient way to short the bond market.”
The social mood is one of agitation which is not surprising. A study has shown that 93% of financial advisors suffered from Post Traumatic Stress Disorder following the 2008 crash. By that I am not saying that you should start losing sleep because you have been selling the new Tata or Oxley to your clients. It is a natural course of events that follows through in any cycle.
These 2 headlines do not make sense to me.
| Reuters : Emerging market growth expectations hit seven-month low -HSBC |
| FT: EM borrowing costs tumble to record low |
Asia is rushing out to issue bonds and equity, and its been a mad week for issuance.
I pulled out a cute little chart of CDS indices just for perspective. It does look like the past 6 years never existed.
The white line is for the sub investment grade European bonds.
The yellow line is for the Emerging Market sovereigns.
The orange line is for 40 Asian investment grade names such as Hutchison etc.
On The Domestic Front
Another week, another Tata. TML (subsi of Tata Motors) came out yesterday for a SGD 350 mio 5Y issue which was well oversubscribed with books in excess of SGD 1.7 bio and coupon lowered to 4.25% from 4.5% indic. Price going at 100.25/100.40 now.
Oxley Holdings 4Y SGD 150 mio, going at 100.50/100.65 and First Reits 4.125% SGD 100 mio 5Y going at 100.90/101.05.
It has been a week of records. Next week should hopefully give us some breathing space and time to reflect on the great exit to come.
2012 ISSUES (including most of the Olam bonds)
Are you suggesting that it is a bad time to buy bonds? (be it perps or straight bonds)
Personally, I will not buy anything, in general, but I suppose there should be some under valued paper somewhere out there that no one has noticed 🙂
Unicredit considered one? 🙂 I thinking I have been thinking too much these few days over this bond..
Think too much is not a good sign. Means you are not comfortable ?
Why invest unless you are sure of yourself ?
The questions to asks… where are we in the credit cycle?
1) Corporate spreads is at its tightest.
2) Rates can’t get any lower.
3) Companies that have leveraged up, are they making proper investment decisions?
4) Are the companies on floating rate debt?
I can’t reconcile the fact that many eco indicators are indicating a slowdown. Yet we are seeing new highs in equity markets.
Guess money printing is magical.