Bonds In Conversation : Stuck At The Green Light With Unfinished Business

Lornie Road into Marymount Road. Choke, splutter and spit but the cars ain’t gonna move at 720 am in the morning because whoever programmed the timing of the lights there got it majorly wrong, pardoning my unworthy layman opinion, being unable to see the divine logic behind the Cambridge master plan.

Stuck behind the green light with unfinished business is where we are at.

We live in a highly connected world and the current one has too much unfinished business on our hands. I have been feeling this heightened uncertainty since the start of the year and matters seem to be imploding.

Major global economic risks in the spotlight as follows.

• US slowdown and Fed taper (FOMC March 18-19)
• Abenomics, April sales tax hike versus fiscal and monetary stimulus (BoJ meeting on March 12)
• China growth outlook and growth (China communist party congress on March 5)
• Eurozone slowdown and deflation (ECB on March 6 and EU summit on March 20)

All these to worry us on top of political turmoil in Ukraine, Venezuela, Thailand, just to name a few. No wonder policy makers are at a loss and policy guidance is ambiguous and confusing.

The over riding market belief that EVERYTHING WILL BE ALRIGHT because the Fed has not failed us in the past 6 years is leading to the current complacent state of the markets, that is content to continue to push stocks higher and support bond prices.

Now, the question to ask is, what if, hypothetically, the Fed does not see it our way ? And perhaps the vociferous rhetoric on global inequality will start to strike home ?

Credit markets mostly quiet and holding in the hard currency space and Italy yields have hit a 8 year low . In EM local currency space, the outflow for the first 2 months of 2014 has been double the total for 2013 but I suspect Russia can take the blame.

In Singapore, we had the most successful bond issue of 2014, out of a twice removed subsidiary of the unloved Ping An Insurance. The main reason being due to the spate of perpetual bond redemptions leaving the market more beggars than choosers, thus allowing the issuer to save 0.25% on the coupon.

Leaving you with the prices and a happy month end.

US Bonds listed in SGX and HK

2014 SGD Bonds

2013 SGD Bonds