Bonds In Conversation : Thinking of Taper, Acting like QE
It’s been a short week for Singapore and a painful week for most EM especially India whose currency saw a new lifetime low against the USD, managing to outperform just Gold. The JPY strengthened as the market behaves like a spoilt brat, unhappy with status quo on the Abe arrows expecting more stimulus as if they have not learnt anything from stimulus tapering in the future.
Indeed the Credit Suisse USD 2.5 bio CoCo issue has rallied on the week, despite its “wipeout” clause should its Tier 1 ratio fall under 5%. The CS 6.5% 08/2023 issue up at 100.75/101.00 as we speak.
Yet all is not rosy for selective names such as Bakrie Telecom 05/2015, losing 5 points overnight to its 24 cts level now.
That is how I see the markets. Thinking of a taper and yet behaving like QE. Bonds are back in fashion and locally we are seeing a hunt for yield as stock markets show signs of fatigue, the S&P reluctant to rally in the face of decent economic data and non committal headlines this week being a sure sign.
In other news, Petra Foods managed to redeem their outstanding SGD 4.5% 2014 bond after the disposal of their core business. This looks like the last one.
Prices are higher on the week as SGD rates edged lower and the SGD strengthened against the USD into the long weekend.
I still cannot find a decent reason to be bullish so I will leave you with the prices (as of yesterday), some of which are missing (especially those arranged by a certain bank). I have my personal valuations for them and am looking to create another column for theoretical prices. My question is, would you want to be buying bonds whose prices are always in the grey zone ?
Hi tradehaven, thank you so much for the wonderful write ups and charts again. May I seek your kind opinion on this: Mapletree Logistic Trust Perpetual 5.375 was 102.25/102.65 on the chart a week ago. Latest indicative on chart above is around 99.3/100.7, last done 100. Are there any adverse news on Mapletree Logistic for the price to go down so much in a few days? I am actually looking to buy in a bit more of it. Separately, if there are any news or whispers of the new launch of any local banks or Temasek SGD bonds, do kindly share with us. Thank you so much again. Have a great National Day holiday!
Thanks for spotting the error. The price does look a bit odd though it was quoted by a bank. I would take the 102.00 price as closer to the market. Apologies if it has caused you alarm.
Hi Tradehaven, thanks for the explanation. Much thanks again. Looking forward for the new bond directory in the future too 🙂
Hi Tradehaven,
Thank you so much for your time & effort to include last/bid/ask prices. This is your great effort & great help to all of us.
Still looks a bit messy to me. I will try and refine it along the way. Thanks for the support and feedback.
What you have done here is not only good enough but it is already great for all of us.
Thanks Jim.
We have more coming up. The project is finally coming to near completion.
Hopefully it pays for itself going forward.
Thanks for all the support.
Thanks for the improved bonds table with bid and offer columns! Do continue to provide the regular bond updates… very much appreciated! 🙂
May I clarify if the columns for ‘last price’ and ‘1 week ago’ are with reference to bid or offer prices?
Hi Friend,
Last price is to reference to the previous week’s price. I will try and make sure it is the mid price to avoid confusion. Thanks for the feedback.
No worries… maybe two columns for last price? One for the bid price, and the other for the offer price?
Dear Tradehaven,
This is my 1st post. I am here to learn more about Bond. I started to go into bond trading only in 2010. I am very aggressive investors. I buy into more Chinese developer bond which done been very rewarding. I leverage a lot to get a better return (est 150k/yr)
Hi Vic,
Good on you ! You seem to be highly attuned to your investment style and risk appetite so I am sure you will do well ! Good luck !
I am aggressive into stocks b4 2010. I am lucky to survive the 08/09 crisis. I switch more to bond (80% holding) as I find it is less volatile. I see how some very smart bond investor borrow cheap money in 2010 to enhance the bond yield. So I just follow the so call BOND EXPERTISE. Some foreign bank give a very high LTV. Local bank ZERO LTV. Eg. Trikomsel SGD bond 5.25%. LTV 70%. I only need 30% of 250k (S$75k) to buy one lot. So my net yield is > 15%.
FYI, I do worry about the rising interest rate next year. My main intention is to slowly de-leverage by 2015.
Hi tradehaven,
I am not sure what Vic refers to as LTV in this case, but I do have a banker that can arrange for me to buy a particular bond at less than the usual $250 a pop, if there is a counterparty offering such smaller amounts. Is this possible? Or it is only for specific bonds only?
Thanks for helping with my enquiry.
Actually there is no hard and fast rule, from my experience. If a bank is willing to entertain <250k, it is by their own internal prudent measures. It is just that it is difficult to dispose of odd lots and also the accredited investor tag, if they are willing to take the risk. I have done it before in the past, i.e. entertain such amounts to make a full lot.
Hi Tradehaven,
Are you a banker and will it possible to buy corporate bonds through you? You seem to have access to a wide range of bonds. J
Hi there,
Nope. I am not a banker and you cannot buy through me which is good as it means I am an impartial party and all opinions mentioned are my own.
Most of the bonds are not traded anyway and the prices I list are just indicative prices.
Hi Tradehaven,
Thanks for your reply. May I know how retail customers like us can have access, if at all, to the bond prices that you seem to be able to get? I am relying solely on your website to get a good idea of the prices and that the bankers I have are ‘honest’ with me. J
Are there any other sites to get ‘updated’ prices?
Again, thanks!
Hi Daylami
That is why I am building a webpage for it.
I have been in the business for many years and realise that there is a glaring inadequacy for the retail customers. Even if your banker tells you he will only take 20 cts off the offer. You do not want to look stupid and say you have no idea where the offer is, like many people out there.
I have seen this happen many a time.
Hello Vic, I am not sure if you are the “VIC” actively in the condo forum. If yes, I think you are very successful with regards to bond trading. I’m in a similar shoes as you : highly leveraged and waiting for the right time to get out. Currently vested in local banks perpetual and also stuff like UniSpa / Tritekom ….
I am the VIC in the condo forum. I find that the more I share how I invest in Bond. The more I learn. The last 3.5 yrs has been a very rewarding investing in Bond. But I don’t know the 2014/2015 . It need just one bad yr to wipe out all my 3.5 yrs profit. I hope I got the courage to reduce my leveraging & not be GREEDY.
Chinese developer Evergrande was accused of fraud by Muddy water in Jun 2012. The bond price drop <80. Now it is back to 100. Olam was accused of accounting scandal by Muddy water Nov 2012. I think the Price drop to 82. (USD 5.75% bond) Now @96+. If I sell now. It is almost breakeven.
So I believe for those who did not borrow money to enhance better yield. I think they should be OK if it is a investment grade bond. Just hold to maturity. This is what I think & may not be correct.
I don't trust the banker. So I need to be hardworking to find out more myself. Hopefully can learn more from Tradehaven & others.
rdgs,
Vic
Yes. Common sense is the best weapon.
I find that if Cheung Kong Senior Perp 5.25% SGD bond fall around 85 to 88 (currently 93?). The yield to perpetual > 6% (if it is not call in 2016). I think it is a common sense to buy as a long perpetual portfolio receiving >6% per yr. This is what I think but the banker doesn’t buy my investment idea. I dont think SGD fixed deposit can go that high (6%) for many year to come. If it really goes to 6% for fixed deposit. I think SG property will really crash like 97/98. I am choosing Cheung Long because it is a quality company.
Why not ?
CheungKong USD 5.375% perp is already trading at 86.25/87.25 6.355/6.275%.
CheungKong SGD 5.125% perp is showing up as 91/92 5.71/5.64%.
Thank for your reply. Still very green in bond trading as I started in Mid 2010. B4 2010. I will go to the unit trust bond fund to look for the top 5 to 10 holdings in their portfolio. I will just follow what the fund mgr top bond holding & buy what they hold, especially those Chinese developer high yield bond. I usually buy short dated bond (2016-2017) or Perp high yield bond with step up. I make sure I do not over leverage to get a better return. Will slowly reduce my borrow in 2014.
That is good. Means you would have seen one flash crash before in 2011 for the Chinese high yielders.
It is good experience.
Sorry typo error. B4 2010, I will go in the unit trust equity fund to look for top 5 to 10 stock holdings. I will buy what they hold. I do it the same as unit trust bond. Just buy what the fund mgr bond holdings.
Hi tradehaven may I seek your opinion on the latest sem corp perp? Thank you so much
Hi Tradehaven,
When Noble issued Noble 8.5% USD Perp bond (callable 2015) in Oct 2010 @Par (100). The noble stock price was around US$1.80. Today, Noble stock price is US$0.89. But the Noble USD Perp bond 8.5% did not drop a lot & price to sell is est 99 (to sell). I do not know why Noble USD perp bond has performed quite well since 2010. It should be like other SGD/USD Perp bond (Genting/Cheung Kong/Citi pacific/ dropping way below par .
FYI, I did bought Noble Perp bond @94 in 2011 & sold in 2012 @98+.
Any reason for this Noble USD perp bond so resilient. More institutional investor holding it ?
rdgs,
Vic
Hi Vic,
That is because its coupon is high.
8.5% ! And at 99 cts the yield is 8.58%.
The low for Noble perp was at about 75 cts in 2011/2012 for credit reasons. Now that things are normal, the higher coupon and yield looks attractive.
However, this bond is tricky because it will be fixed for life if not called in 2015.
Thank you very much. I believe short dated /good companies HY Bond investing can be another alternative for income. As long as they do not borrow & willing to hold till maturity. They should be OK. Many marginal property investor who invested in Property in 2013/2013I think will not likely to gain from much capital appreciation. Some may even breakeven or lose to inflation. My relative bought property in 1997. It took them 12 yrs just to breakeven.
rdgs,
Vic
Vic,
What are your views on Cheong Kong SGD 5.25 been called back in 2016? Apparently, there is no refix or step up. At 92, the yield is close to 5.8% plus upside of being call back by 2016.
Both my bankers do not recommend it as it has no step up. I think at 92. The YTC in 2016 is >7%. I think not likely to be CALL in 2016 as it has no step up & furthermore chances of SGD interest rate going up by 2016 is almost certain. I think I will buy if it drop <90. My tgt is 6% to 7% yield to perpetual. But need to be patience for it to drop. I will treat it as one of my permanent holding receiving 6% to 7% yearly perpetual. I will treat it as a annuity income. This is what I think. It may not be right investment strategy.
Like what tradehaven says, why not.
CheungKong USD 5.375% perp is already trading at 86.25/87.25 6.355/6.275%.
CheungKong SGD 5.125% perp is showing up as 91/92 5.71/5.64%
rdgs,
Vic