Bonds In Conversation : Curling Away On Thin Ice

A cursory scan through the news for the week made me relieved that I had not been paying too much attention to the markets and, instead choosing to do some stuff about the house with the boy, on a week’s break from school.

They say bond traders tend to be more visionary and it is probably true. For all the volatility in stock markets and forex, bonds are acting cool, mostly.

The only good news this week has been Greece announcing their budget surplus would be double the target and China’s record new credit growth which is a bit warped considering their other goal of reining in credit. Facebook shares hit a record high on Wednesday and they are acquiring Whatsapp for a mind boggling sum which is probably a fair valuation except that our brains cannot accept it.

All other news have been quite dire out of the developed markets with Japan leading the list of disappointments, UK disinflationary, European PMI weaker than expected as with China and the US housing numbers alarmingly fragile. Yet most economists remain bullish that it is a temporary soft patch that we will emerge from soon (like they all say).

Almost like watching the winter Olympics curling events with participants painfully easing the stone puck across the ice and waiting with bated breaths for the outcome.

For EM bonds,  Asian EM have held despite talk of Thai bank runs,  the trouble in Kiev is dragging her neighbours down and Russia cancelled a bond auction this week. In Africa, emergency meetings in Zambia as their currency, the kwacha, fell to a new record low against the dollar and contagion spreads.

It is indeed a poor show of confidence after such a successful 2013 for frontier African markets in the global bond markets.
IMF has published an African bond outlook which casts a warning that “The spate of international borrowing by sub-Saharan African countries at rates sometimes below what many euro area countries are paying is probably unsustainable in the long run unless these countries are able to generate high and sustainable economic growth and further reduce macroeconomic volatility.­”

Another IMF report written for the G20 Finance Ministers Meeting this weekend in Sydney mentions the following risks but dangles a $2.25 trillion global economic boost by 2018 IF AGGRESSIVE REFORMS ARE MET .

High Inflation and Deficits – Brazil, Indonesia, Turkey, South Africa
Political tensions – Thailand, Turkey, South Africa, Ukraine
Shadow Banking and Moderating Growth – China
Devaluation – Argentina
Slowing Growth – Brazil, Indonesia, Russia, South Africa

We are skating on thin ice.

Singapore Bonds

Markets saw a 7Y SGD retail issue out of CMT (Moodys rated A2) at 3.08% which will start trading today. Books were 2.8 times oversubscribed overall. The total issue was upsized to $350 mio.

Congratulations to all.

Leaving you with the prices as we look forward to the Singapore budget announcement which I hope will have some goodies for me however unlikely.

2014 SGD Bonds


2013 SGD Bonds