SGD New Issue Urgent Review : HDB 7Y SGD Bond 3.008%
Posthaste !
For all you out there salivating over the latest Capitamall Trust 3.08% A2 rated 7 year paper, there is HDB today.
HDB is printing SGD 600 mio of 7 year bonds at 3.008% (100.00) and your bankers are not likely to tell you about it because they will not get a cent selling this to you.
Capitamall 3.08% 02/2021 is trading at 100.35/100.65 (3.02/2.98%). Why not HDB then ?
1. High liquidity for this name – most banks have lines to quote HDB
2. Trades a tighter bid-offer spread
3. Better credit quality despite its unrated status but it is still a stat board
NUS 1.708% 02/2019 is trading at 1.67% and SMU 3.155% 03/2024 is trading at 3.08%.
The only fall back is that HDB is not available to the retail and trades in lot sizes of SGD 250,000 with increments of 250k.But if you are holding the bond to maturity, it is a no brainer.
Books close at 5pm.
Good luck !
I heard the current price is 100.25/100.5.
I am perplexed why investors would buy this 7 year bond when interest rates are going to rise very soon (2015 thereabout).
Won’t this bond surely tank then since the coupon of 3.008% is so low such that it will offer virtually nothing above UST/SGS?
I had considered buying this bond but when my bankers replied that the price is now above par, and the lending value is still pending (unrated paper), I decided to skip it afterall.
There’ll always be ultra conservatives out there with cash!
Another way to look at this.
1. 7y interest rates 2.28%
2. 7y govt bond is 2.11%
So 7 year HDB which is closest to govt bond is 3.008%. You are protected when rates rise because you have 0.72% buffer from 7 year rate.
Note that only higher grade credits enjoy this sort of treatment.
1. Capitamall 3.08% 7 year is more expensive.
2. HDB bonds qualify for bank’s reserves which means they are much cheaper to hold (even at much lower yield) than all the corporate papers out there.
3. Lending value pending because they do not want you to buy and the price is not 100.25/100.50. It is 100 offer in the interbank market.
hmm… my banker now told me they can lend 90% against HDB bonds..
100.05/100.25
should i bite? very tempted!
Tempting indeed…. 90% is more than home loan financing for HDB flats too !!
And HDB is 100 offer so I suspect the bid is a bit off.
I am not typically fond of bond leveraging because, in this case, 10% margin call would mean a bond yield of 4.5% or thereabouts which seems far off at the moment.
Perhaps consider leveraging it for a longer term, like 3 years (3 year interest rates at 1.1% today) ? to lock in the carry. Just playing the devil’s advocate.
i did on that day queue at interbank BID of 100 and i didn’t get the bond.
if the offer was 100 then, guess the bond desk wanted to take a spread and didn’t want to give it to me at 100 before commission.
anyway i thought it through and decided not to buy it anymore.
the coupon of 3% is too fine. my loan rate is likely to exceed 3% once US starts raising rates.