SGD Corps Comments : They mark them up, they mark them down
When I see the prices now. I know its a retard retail stand up comedy.
My fund manager friends say all the prices are way wrong but who cares because they are keeping it pretty and their mark to markets are looking good.
Today for example, we have interest rates up 0.04 to 0.19%. Technically, bond prices should be lower assuming the companies have not improved in their credit spreads overnight (which few have).
| TODAY | YEST | DIFF | |
| 1Y | 0.495 | 0.46 | 0.04 |
| 2Y | 0.74 | 0.6825 | 0.06 |
| 3Y | 1.08 | 1.025 | 0.06 |
| 4Y | 1.565 | 1.425 | 0.14 |
| 5Y | 1.9275 | 1.78 | 0.15 |
| 7Y | 2.44 | 2.257 | 0.18 |
| 10Y | 2.9225 | 2.735 | 0.19 |
| 15Y | 3.43 | 3.25 | 0.18 |
| 20Y | 3.5725 | 3.395 | 0.18 |
What we find instead is a case of extremely uneven price adjustments that I am worried about.
For instance, amongst the 2022 papers, HDBs are down 2 cts but the rest falling much less. This is unusual considering that bonds like Wingtai 09/2022 are less robust than HDB and we are seeing their yields converge to less than 1% difference for 10 years of risk.
Even better, Wingtai managed to outperform most of the 2015-2017 papers in terms of yield change.
It is not just Wingtai. Tata Communications 2018 and HPL 2018 managed to beat HDB 2018 too by a mile, down just 0.5 cts compared to HDB’s 1 ct drop.
I am hearing retail demand for GLP and Mapletree perps and the street is running low on stock and of course, marking prices higher. Buyers are in danger of short changing themselves at this rate. Why not Ascendas Pte Ltd perp as a better substitute, callable 04/2017, yield 4.75% on offer of 100.00, owned by JTC Corp ?
Qualifier : Comments and opinions here are my own. I accept no responsibility for any of the prices listed or suggestions I make on this post. I have no intention of buying any of the above mentioned bonds.
Obliged to make a comment on Ascendas perp on instigation of an old friend.
The main concern is that it is a private company like Tata Sons ie poor transparency.
Glp is a bigger and better choice that is almost majority owned (slightly under 50%).
As such, the argument is still for Glp though I would challenge the asset quality etc but its hard to make the case given that Ascendas is private.
Look out for Temasek then, I say.
Post coming right up… Probably tomorrow. Wine night tonight.
your readers must be supporting GLP and Maple 🙂 Anyway, it is hard to tell when it is a good time to buy. Few months ago I was tempted to buy GLP at 104. Would this be the bottom? 🙂 No one knows I guess…
Does anyone mind to share his views on whether the current price of these perps and bonds have reflected the expected tapering of QE this year and eventual ending next year and the hike in interest that follows? Or will it probably dip even further when Fed officially materialise these expected events? I am totally clueless 🙁
That is a million dollar question don’t you think ?
Market expectations are for tapering to start in Sep.
There are other factors at play now. China slowdown story, besides the Fed. It is not as simple as QE on or off anymore.
My good friend loves GLP but I am not so partial.
Hi tradehaven may I ask is Ascendas Pte Ltd perp investment grade like GLP and Maple? I am quite tempted to buy more of Maple and GLP cos it seem to have step up on refix date. May I ask do you know if Mapletree logistic have high gearing like Olam? From the data available on the GLP official website, it seems not to have any sgd debt other than this perp I have no idea what is GLP gearing. Wondering what are the pros and cons between GLP, Ascendas and Maple.
Hi
Reits are already geared in their mkt capital because the capital can be considered junior debt.
Both GLP and Maple are rated and publicly traded companies partially owned by GIC and Temasek. Ascendas is not rated and is a private company which is wholly owned by JTC.
Can’t really say which one is better because different people would argue differently. On paper it looks like GLP, i guess.
Thanks for sharing your insights again. Do kindly share with us your insights if you have any thoughts on how these bond price may change as QE tapers and ends + interest rate increase. I am wondering if current prices have reflected all these anticipated events.
Btw may I ask, are there are any reading materials or links on the above you can share with us? Various broking houses have quite extended write-ups on REITS after the plunge but I cant find any material at all on SGD Corporate bonds anywhere. Bloomberg and stuff have articles on US government bonds/ corporate bond at times, I am wondering if what they say applies to SGD corporate bonds too. Many thanks.
Btw UOB preference share 5.05% is callable September 15 2013, 2 mths from now. If you happen to have any updates on whether UOB is redeeming the pref shares, do kindly share with us if possible. May I express my sincere thanks in advanced.
Hi, Uncle Ben said even after taper, interest to be still accommodative. Anyone has a view of the likelihood of Mapletree Treasury Scv perp 5.125% being recalled in 2017, if no recall, it refixes only in 2022.
That is a tricky question. Who has a clear idea where rates and credit spreads will be in 2017 ?
That is has the option to call in 2017 is a bonus to the issuer which obviously investors did not think much about when they bought the paper last year.
As long as it holds under 100, I guess the call will not be exercised.
Genting perp is just as tricky, trading very close to its refix coupon.
What Uncle Ben says is not as important as the market’s reaction to it. You should not be concerned with playing your hand, but rather that of the bigger participants.
Correct.
So far prices are stabilising. But given that global investors have so much to choose from, there may be more sellers than buyers going ahead.
Thank you. I too thought no one could crystal ball but one PB advises clients to switch long tenure to shorter ones and said 6 months ago there was still possibility of a call in 2017 but not with what is happening now. How fortunate I am here to be able to seek alternative views. Grateful.