Temasek and her bonds (updated)

Temasek Investor Lunch next Monday at the Mandarin Oriental.

July 8 (Bloomberg) — Two people familiar with the matter
said.
• Co. hires DBS and UBS to arrange the meetings
• Meetings to be held next week in Hong Kong and Singapore

No information on whether they will be going west.

Headlines so far :
* Temasek Seeks $6.7 Billion Stake in Lloyds Bank, Times Reports
* Temasek Looks to Expand in China as Crunch Is Under Control

*TEMASEK ASSETS ROSE TO S$215B VS S$198B IN YEAR ENDED MARCH 31
*TEMASEK 1-YEAR TOTAL SHAREHOLDER RETURN 8.9%
*TEMASEK AVERAGE TOTAL SHAREHOLDER RETURN SINCE INCEPTION 16%
*TEMASEK SAYS SINGTEL, CCB, STANCHART MAKES UP 29% OF PORTFOLIO
*TEMASEK SEES INCREASING OPPORTUNITIES IN NORTH AMERICA, EUROPE

To the global credit markets, Temasek is synonymous with Singapore given the absence of Singapore in the debt space.

Lets put Temasek in perspective for the local bond investor.

Temasek Credit Default Spreads worked into SGD terms (to be as accurate as possible, I used the SGD/USD cross currency swap bid to ensure there was no basis difference in the lowest possible yield scenario)

	BID	OFFER	MID CDS		SGD YIELD	GOV BOND
1Y	17.8	24.8	21.3		0.61	0.14
2Y	25.7	33.6	29.65		0.86	0.18
3Y	37.8	46.7	42.25		1.25	0.31
4Y	51.8	61.7	56.75		1.75	0.54
5Y	63.1	73	68.05		2.20	1.08
7Y	76.4	88.4	82.4		2.80	2.28
10Y	88.5	102.7	95.6		3.36	2.61

The theoretical Temasek 10Y SGD yield looks better than DBS 3.1% 02/2023 sub debt which is offered at 3.1% !*** [please refer to my post  SGD Corp Comments : They Mark Them Up, They Mark Then Down , yesterday for other 10Y corporate bonds for comparison]
*** been corrected here. DBS is callable in 2018. I suggest we use MRT 10/2022 at 3.15% or Starhub 09/2022 at 3.4%.

To assure myself, I dragged out Temasek’s outstanding bonds in the marketplace. For those denominated in foreign currencies, I did a rough swap back into SGD using, again, the SGD/USD bids. (So much math for no pay !)

The numbers look about right for the non SGD issues.

As for the SGD issues, I suspect entire chunks are sitting happy and pretty in all the investment books and will not see daylight for a long time.

So what should we expect next week ?

A new issue of course. So many acquisitions to give 16% return to the country and money is still cheap to borrow.

In SGD ? Potentially. And that would definitely crash the interest rate market if they do because of the necessity to swap into USD (SGD rate traders better buy me a drink for this tip off !)

But hold on to your horses. It is easier for them to issue in USD because 1. that is what they need and 2. they can get a bigger benchmark size.

SGD is only better because 1. they can pay less and 2. it will escape global scrunity like all the Tata etc issues.

My thoughts ?

10Y 3-3.25% SGD and we will probably be seeing queues. More likely a 15Y at 3.75-4% to blur the markets. But please do not forget about HDB 10Y, like I said.

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