Bonds In Conversation : Taking It Slow

17/10/2013 by

No Shutdown in bond space as bonds rallied along with the S&P aided by the end of the Taper.

The Shutdown accomplished 2 major feats.

1. Ended the Taper nonsense

2. Ended the EM crises

And, from another angle, drove the stock market to close in on its all time highs. In Europe, we saw a historic high in the Dax again, all thanks to America.

Economic numbers have been forgotten in the past fortnight or so with the market only concerned with the euphoria of more govt spending in the next 3 months – till the next Shutdown which worked well in terms of a 2 week paid holiday for the furloughed workers.

The Singapore corporate bond market took a breather this week with no new issues, after last week’s Marco Polo Marine and a smallish 8.5% SGD 30 million one out of Enviro-Hub Holdings which I cannot say I have heard of until today.

Credits in Asia have fared superbly this round, performing strongly in the face of the potential US sovereign default. Now that default fears have left us, the show will go on with bonds in the driver seat.

I believe issuances will start picking up for the final run into year end, the main worry would be demand. For some time now, the secondary market has been stagnant with a dearth of tradeable prices, leaving bonds to wallow in the accounts of buyers who are unable to sell or trade actively. This will lead to demand concerns for new issues.

If we compare 3Q statistics, 2013 only saw SGD 5 bio worth of new issues compared to the SGD 11.28 bio issue in 3Q12. Buyers should rejoice on eliminating the worry of over supply, yet it could also imply the simple absence of demand in the near future possibly due to rotation into equities.

Now that interest rates look set on its course for zero (after Monday’s MAS MPS), I would urge readers to take it slow and resist the urge to grab for yield on leverage or not, especially after the credit scares we have been seeing.

Leaving you with the prices, all unverified and throwing in a bunch of USD bonds listed in SGX this year for your reference. Do let me know if they are useful.

2013 USD bonds listed in SGX.