SGD Corporate Bonds Outlook : No Keen Bids
Hearing a few client complaints on the street that banks are unwilling to bid for papers or honour prices indicated on screens which vindicates my point last week that most of the prices out there are cosmetic.
No wonder credit spreads look so good. The prices do not hold.
This is not even a credit crisis yet and thus it is slightly alarming.
My advice to folks at home. Do not panic if you really need to sell bonds and do not think of suing your bank because you are a sophisticated investor and expected to understand the risks involved in transacting in the OTC market.
I suggest you leave a sell order with your banker, on best effort basis.
These are heavenly times. They can potentially gorge you on the bid and rip up the offers because somewhere out there, there will be a hapless soul who thinks that paying 100 for Trikomsel or Tata Steel, for example, is a good idea since they missed out on the launch.
Well, there is no time for compassion or sympathy. There are people buying Oxley today.
Well, I suppose at the end of the day, if one is not leveraged and the fundamentals of the underlying issuer is sound, just wait out the volatility and you will get back par plus interest over the course of the tenure!
That is an excellent suggestion that institutional investors sometimes do not have.
We are behind you all the way !
Agreed. If one believes that the interest rates going forward will rise, then strategize by buying shorter term tenures in a staggered manner (of tenure expiry). This way, you get to roll into new issues with higher interests as time passes. And stay away from crappy perps!.
Am holidaying in Taiwan and just saw the Oxley issue. No surprise who was the book runner. Wouldn’t recommend it to any clients unless I don’t like them. 35 cents rebate – so what?
You are very right that the prices are largely cosmetic. This is especially so for long dated bonds and perpetuals.
If bid and offer prices are cosmetic, how to buy/sell bonds during these times?
Cosmetic in that the real bids are actually much lower. Usually happens when the banks are reluctant to buy which makes sense given that the credit spreads are too tight.
Best to leave orders with your bankers and if they can find a buyer, they will match your trade.
Agreed. You just have to trust your banker in times like this…
Yup, my other point is retailers have no way to getting the real prices.. for eg. usually when they want to sell a bond, I am sure they will call up a few bankers and ask for quote. If all of them quote at the about the same price, doesnt it give the seller a false sense of price security? And he will think that is the best price to sell at. Same goes for buying…
I do hope sgx can make the bond market transparent.. but i guess that will take a few years…
Hi Newbie
You are right and that is one of the primary purpose of this blog. To help educate the retail investor.
The price discrepancies are HUGE ! I am talking about cents because many retail investors do not realise that paying 100 for a 10Y bond that is worth 95 cts is actually 0.5% in interest they are losing per year.
The mark ups at most of the priority branches are not just horrifying especially if they are willing to bid the paper back from you. But when you sell someone a bond at a 2-5 cts rip off premium and try and rip them off on the way down, I just cannot bear to watch.
But then again, they will turn around and laugh at me because Oxley sold 100 mio with no sweat.
One consolation. Singapore is not the only country in the world whose OTC market is such.
What do you see for mapletree 5.125 bid/ask?
99.25/100 it looks like. Bounced off the lows last week of 97.50/99.00.
How about for GLP and mapletree log? More interested in these 2. Thanks
GLP is looking like 100.50/101.50 but I am not sure.
Mapletree Log should be the same but there are no prices out there.
Hi travehaven, am I right that in the present situation whereby interest rate is going to rise soon, it is best to get perpetuals that has a reasonably short refix date for coupon? Mapletree treasury I guess has refix in ten years, but GLP, Mapletree logistics 5.375% and Hotel Properties 6.125% has refix in five years. Possible to share your views if it is a good idea to switch to the GLP, MLT or HPL perpetuals? I have little knowledge about Hotel properties so far, you have any idea it is investment graded like GLP and MLT perps? I am wondering what are the pros and cons of the three perps. Thank you so much.
Just saw this…
I cannot really say at the moment. Have to relook at their call features and the details.
And besides, you cannot really put HPL in the same league as GLP and MLT.
I just published the weekly bond commentary. You can take a look and compare their relative values. Seems that the market has been buying the GLP and MLT this week. Offers are higher.
Sure many thanks for the reply. I will check out the latest post again. If you do have any details of the difference in the call features do share with us. They look very similar to me. Many thanks again.