Crazy Month End – Big Candles, Malaysia Downgrade, And This Indian Oil Business
This shows how on the edge the market is.
Did anyone see that big candle in Gold this morning ?
No explanation offered yet except that a german bank bought a chunk.
USDSGD and a big candle up after the unemployment rate rose to 2.1% (vs expected 1.9%) and bank loan growth showed signs of slowing down, just growing 17.7% (vs previous 18.8%). Target 1.28 into next week, I say.
July 31 (Bloomberg) — Malaysian stocks fell the most in
almost seven weeks, the ringgit slumped and bonds extended
losses after Fitch Ratings cut the nation’s credit outlook,
citing rising debt levels and a lack of budgetary reform.
Negative + negative cancels, so SGDMYR not seeing much of a spike and stabilising around 2.55 but it looks like nowhere near a top.
Bond Market
Peripheral and frontier bonds getting hit. Ghana and Nigeria now paving the way for Ivory Coast and Senegal to issue next.
Indian names getting hit today too. Newly issued Indian Oil in USD widened back out and is trading at cash price of 99.00 mid. Strangely, SGD corporate bonds for the Indian names are looking higher today.
I decided to try and value the SGD Indian Oil 4.1% 10/ 2022 vs the new issue USD Indian Oil Corp 5.75% 08/2023 and work out where a fair level would be. Quite horrified by the results.
Indian Oil USD is trading at about 5.85% now which translates to roughly 5.5% for the SGD paper and a cash price of 90.00.
The market price, however, is 95/95.50.
Quite a steep drop.
“Indian Oil USD is trading at about 5.85% now which translates to roughly 5.5% for the SGD paper and a cash price of 90.00.” – based on the 10 year USD/SGD basis?
Yes.
It is looking even worse today with the USD bond hitting 6% and the SGD paper still holding out.
You might as well buy the USD bond and hedge the coupons and you will be earning alot more plus it is more liquid as well.
Note That This Is Not a trade recommendation !
Can I kindly ask how you derive this information from Bloomberg? Been trying to find the screen but all show data unavailable :((
Well, the ASW screen on Bloomberg does not really work ie swap into SGD because it does not assume a par-par swap and includes the entire 1st fixed coupon. You can give it a try if you like. Or you can use SWPM and key in the bond details.
I have a spreadsheet so I can see the whole list.
Thanks, will give it a try, consult you if I have any issues 🙂