Bonds In Conversation : Paying The Price For Another’s Mistakes

A lesson to be learnt in the massive traffic jam on the Singapore side of the Johor causeway – what a wonderful position to be in for others to pay the price for your mistakes. Spore JB Causeway Jam

I had plenty of time to read all the negative credit news while because I could have flown to Hong Kong for the time it took to just cross the causeway yesterday apparently due to some lapse in security some days earlier which let an alien into Singapore. Thus, the rest of us have to suffer for the security’s and the alien’s mistakes.

The situation in China is precarious with investors waiting on edge as ICBC wavers between bailing out the trust or not. They are truly no beholden to and it would set a dangerous precedent indeed if they did, for these are not small isolated solar companies anymore.

The latest is that ICBC won’t “rigidly” pay investors for possible losses related to a trust product that it distributed, CNBC reports, citing Chairman Jiang Jianqing, as reported on CNBC even as China raises the CNY reference rate.

Adding fuel to the fire is the media repors that some farmers’ financial co ops are failing to pay up.
Jan. 24 (Bloomberg) — Media reports that some farmers’ financial cooperatives are failing to pay depositors may be another sign of rising financial stress in China as interest rates rise and economy slows, Zhiwei Zhang, China chief
economist at Nomura, wrote in note yesterday.
• Continues to see credit defaults to occur in corporate, LGFV and shadow banking sectors in 2014
• The fact that CNR, a major official news agency in China, reported on co-ops may suggest govt stance on financial risks is to acknowledge problem, strengthen regulations
• NOTE: Some farmers’ financial cooperatives in the eastern Chinese city of Yancheng start paying back depositors after local government intervenes, People’s Daily reports today

Whilst the distress in Asia appears to be contained in just Chinese credit space, we should expect contagion to spread to the region in due course as Latam and Turkey continue to be battered resulting in historic lows for the TRL and ARS.

Yes, I know we did no wrong. But it is all about paying the price for others’ mistakes.


Meanwhile we had a good week in SGD space with today’s Industrial Production numbers surprising on the upside coming at 6.2% YoY growth against expectations of a drop of 1.4%. CPI numbers coming lower gave the 10Y SGS a boost for it to rally 1 ct on the year, beating most corporate bonds out there which is a pity as banks were busy selling the new issues out of HDB, Midas and Mustafa Holdings (today’s deal).

HDB printed its longest paper yet, a SGD 600 mio 15 year bond at a coupon of 3.948% maturing in 2029. The equivalent SGS maturing in 2030 is trading at about 2.97%. The paper has since rallied higher, indicating 100.25/100.55 today.

Midas Holdings came out with a SGD 85 mio 3Y new issue at 5.75% and we have Mustafa Holdings going for the same tenor today at a lower yield.

The market got all excited on Wednesday when Olam bought back $39.2 million of their 7% perpetual (at average price of 92.38) and $ 15 mio of their 6% 2022 paper (at average price of 92.96) in a potentially private deal as it would appear that bondholders were not informed of a reverse tender. Post the buy back, prices would appear lower possibly because of the general weakness in credit markets.

Olam Indicative Prices

Issuer Name Coupon Maturity Curr Bid Price Ask Px
Olam International Ltd 6.75 29-Jan-18 USD 100.963 101
Olam International Ltd 6 25-Oct-22 SGD 91.15 93.15
Olam International Ltd 5.75 20-Sep-17 USD 95.373 96.46
Olam International Ltd 5.8 17-Jul-19 SGD 95.581 96.4
Olam International Ltd 7 PERP SGD 90 91.5
Olam International Ltd 6 10-Aug-18 SGD
Olam International Ltd 7.5 12-Aug-20 USD 95.4 95.4
Olam International Ltd 6 15-Oct-16 USD 99.968 100.9

Leaving you with the indicative prices and wishing all a happy lunar new year next week.

SGD 2014 New Issues


2013 SGD Issues


2013/2014 USD Bonds Listed in HK and SGX