Bonds In Conversation : And The Best Bond Award Goes To

01/11/2013 by

SINGAPORE

It is a subjective matter but the best bond on the menu in Singapore would go to the new 20Y government bond auctioned in Aug this year which is trading at 106.50 today which is a 6.5% gain in 2 months.

My friends argue that if we use end Aug as cut off, the 30Y and rest would look just as look. But lets just stick to capital gains from par for simplicity sake.

I would like to demand a drink from anyone who had profited from reading my post in August and who is not from the industry. https://tradehaven.net/market/singapore-government-bonds-not-safe-haven/

Yet, like last Sep when I mentioned the best performing bond was the 30Y SGS, if the buyer had not taken profit in time, they would be dealing with a 97 ct price today.

https://tradehaven.net/market/why-not-singapore-corporate-bonds/

Of the corporate issues in SGD this year, the UOB perpetual stands out, holding on its 102.60 bid price with little competition from the rest.

Issuance has been lagging and sizes unmeaningful. Even the widely anticipated new Vanke 4Y SGD bond only managed to garner a 140 mio non benchmark size from institutional clients despite its fair spread which goes to suggest the general mood in the markets is a tad dour.

The only segment that is still in an active investment mode would be the retail segment evidenced in the demand for the new Heeton Holdings 2Y paper that was marketed at 5.6% and yet another reopening for the Oxley 1Y.

Globally, we had 2 major central bank meetings that ended status quo but as Citi says, “neutral is the new hawkish”. The markets expect more easing, over and above the current pace and the current pace is not good enough.

More dirty laundry from the banks in the forex rigging scandal which is making me suspect that the drought in liquidity will continue especially with the new Basel 3 proposal for bank’s trading books (those are the people you buy and sell your bonds to) and the European bank health checks which will run into 2014. http://finance.yahoo.com/news/banking-regulators-propose-tougher-rules-145130208.html

On the credit front, it has been quiet in Asia except for mild fears on China’s liquidity squeeze which affected mostly the high yields to a little extent. Nothing much to scream about as we watch for the 3rd plenum starting on 9 Nov.

Interesting new issue out of Clifford Capital (AAA) that is fully guaranteed by the Government of Singapore, to the great advantage of the other shareholders.

Clifford was able to print at 5Y US Treasury + 0.53% to deliver a yield of 1.81% for 5 years. This bond will be unique because this is the closest to the Singapore Government you can get for USD debt and not even Temasek comes close.

Major Default

“Oct. 31 (Bloomberg) — OGX Petroleo & Gas Participacoes SA’s bankruptcy protection filing in Latin America’s largest corporate default is dimming the prospect holders of the world’s worst-performing bonds will recoup their ill-fated investment in Eike Batista’s oil ambitions.
OGX, which transformed Batista into Brazil’s richest man, submitted documents in a Rio de Janeiro court yesterday, culminating a 16-month decline that wiped out more than $30 billion of his fortune and left holders of $3.6 billion of the company’s bonds with losses of as much as 89 percent. OGX has total obligations of 11.2 billion reais ($5.1 billion).”

Blackrock and Pimco count among the debt holders.

It is human nature to think it will not happen in our backyard.

I end this week with the prices – USD and SGD (all to the best our knowledge).