Bond Market Health Scan : Singapore

Numbers do not look good but do not be deceived. The market is showing some healthy diversification in the past months.

We seeing pathetic bond market issuance activity, not seen since 2008-2009 during the heart of the credit crisis and have had only 3 benchmark issues >SGD 250 million since June this year, granted that June was the driest month ever for corporate bonds with only 1 Heinekan SGD issue for that entire month.

ISSUANCE AMT 2007 2008 2009 2010 2011 2012 2013
1ST QUARTER 4,155 2,525 1,764 6,052 5,920 9,037 5,370
2ND QUARTER 3,303 5,937 3,410 4,422 4,530 6,912 4,242
3RD QUARTER 2,136 7,071 3,472 8,778 6,555 11,288 5,062
4TH QUARTER 3,051 215 2,807 5,427 4,294 3,787

The new issues for the quarter, if we take out the gargantuan HDB 5Y 1.45 bio issue, have shrunk to small and mid sized chunks of 30-150 mio from a host of mostly, unfamiliar names.

Names like Mencast, Hankore, United Enrivotech, Perisai Capital and such. Names that fund managers avoid because of the amount of credit work required for the small issue sizes that are unlikely to repeat in future issues given the small market caps of the companies involved.

Diversification of Issuers

We should congratulate ourselves for we are growing up. Our market is evolving into a new ballpark and engaging the retail segment, tapping on the fat bank balances sitting idle. Public awareness is gaining fast in bonds as a fashionable investment avenue.


Investing in small issues and high yield bonds do have their risks. A glaring one being the impossibility of obtaining prices. What do you expect when you buy an obscure company with possibly only 2 or 3 banking relationships ? Surely that bond will not be very liquid even with the originating bank.

The inavailability of transparent pricing leads to the second big problem that the buyer or seller would largely be at the mercy of their banker who has to be trusted not to pad the prices too much.

The sore absence of readily available credit research is also a massive blackhole for would be investors, who only have their banker’s assurances to rely upon.


Well, we have to understand that what is happening is a global trend. Just spent the larger part of the day at a high yield bond conference and got to understand some of the trends and developments in the NOK market where they have a sizeable junk bond market of NOK 25 bio.

The takeaway is that they are seeing increasing international participation and growth in the retail segment for their USD issues. They have grown in sophistication as savvy buyers participate in the marketplace making price discovery and comparison easier. Leveraged bond buying is really taking off and loans are readily available.

In Singapore, my opinion is that issuers have it too good. The retail buyers are not as discerning leading to some mis-pricings for certain high risk issuers which are often masked by illiquidity and wide bid-offers that do not work in the favour of investors.

I give the example of Tata Steel, one of the last benchmarks that came out in April for SGD 300 million. My opinion then was that the coupon should have been in the region of 6% or above but 4.95% had no trouble selling amongst the private bank clients then.  The bond proceeded to lose  3% within a month and another 5% before July. Bankers dismissed that the coupon would be able to make up for the capital losses which was made worse in the cases of clients who had leveraged to buy the “hot” issue at launch. Well, the bond is trading at the 83 ct handle now.

If you held a gun to my head, Tata is in the high yield category and 5% is not high yield but we had little to compare against and I have nothing against them in the least because GIC does have a small share, I believe and their business is looking to turn around soon.


Interesting times ahead. More funky names and issuers to come loaded with covenants that will bowl us over. Everybody is following the US lead and borrowing their guts out, it seems.

Khazanah Said Planning to Market S$650m of Convertible Sukuk
Oct. 17 (Bloomberg) — Malaysia’s state-owned sovereign wealth fund plans to market the Islamic bonds exchangeable into IHH Healthcare shares next wk, according to 3 people familiar with the matter.

Why Pay ? Just borrow. Even bond buyers are borrowing to buy bonds.

Does the term house of cards mean anything to you ?

Happy Friday.