Bonds In Conversation : Back To The Future – Hope & Optimism

Not a good week is perhaps an understatement although the ripples have yet to reach too many of the man on the street yet.

I do not think we are deaf, dumb or blind but there is a human emotion called Hope which is accompanied by another trait that ensured our evolutionary survival which is called Optimism, that served to sustained our species over time. And of course, the good rumours like this one today of a of China RRR cut over weekend which is causing a spike in SHCOMP & HSCEI, spread by, obviously, the equity folks.

An example would be this morning’s Inside Asia report out of Bloomberg which is utterly depressing with not a single iota of good news in it.
Extract :
1. Yuan rises; China’s insurance regulator tells insurance companies to watch out for debt investment risks, especially with local government financing: Shanghai Securities News; ICBC, CCB stop selling trust products, Securities Daily reports; nation’s beige book says economy slowed this quarter as company sales slow, according to private survey; government is accelerating process to promote consumption: China Securities Journal
2. Baht strengthens; grenade attack near Thai Judge’s house injures one; Thailand’s Constitutional Court meets today to discuss petition to annul Feb. election; protest leader Suthep vows to obstruct any new election; National Anti-Corruption Commission says it found enough evidence to indict acting Senate speaker Nikom Wairatpanij for abuse of power
3. Kiwi rises against dollar; New Zealand’s ANZ consumer confidence falls for a second month in March from month earlier: ANZ job advertisements rose 3.7% in February on month from 2.8% in January
4. Ringgit falls to lowest in more than a month; Malaysian data may show consumer prices rose 3.4% in February on year, in line with January reading, according to a Bloomberg poll
5. U.S. treasuries steady, with the yield on the 10-year note at 2.772%; EU cancels summit with Russia; SEC said to be examining hidden prices in bond trading
6. Rupee forwards rise; Reserve Bank of India Deputy Governor K C Chakrabarty to leave the central bank in April two months before end of his term; government to repurchase 50b rupee of bonds via reverse auction, RBI says

That is mainly because the top headline is “Asian Stocks Increase With Metals as U.S. Data Counter Concerns Over China“.

The only good news this week is perhaps for Colombian bonds.
” Colombia’s weight in the JPM EM Bond Index will rise from 3.2% now to a likely 8% at end-September. This 4.8ppt rise will be ‘paid for’ by a reduction across primarily Russia (from 10% to 9.02%, or down 0.98ppt), Turkey (down 1.19ppt), Thailand (down 0.85ppt), Indonesia (down 0.58ppt), Hungary (down 0.57ppt) and Nigeria (down 0.57ppt) in a phased approach starting 30 May.”

Lucky there were no reporters around during my lunch meeting yesterday to hear all about the concerns some hedge funds and strategists have with the global economic picture.

The private banks are just starting to see small signs of distress, which is none too distressing unless another wave of capitulation hits but some people are starting to get out as Reuters reports that Taiwan checks 7 banks after complaints about yuan losses and similar talk on Korean banks.

Perhaps it is the current global preoccupation with finding the missing Boeing Stealth Airbus or Putin’s antics in Crimea, perhaps not everyone has a relative or friend in banking or perhaps of the semi media blackout in Asia with regards to developments in China and not enough Mandarin literate reporters in the West, or perhaps it is just too complicated that it is easier to think of the future where everything will be alright ?The last theory is probably the best one !


While we are busy with psychics and bomohs, things are moving quickly behind the scenes. Bond exits are potentially in store for the Mar month end portfolio rebalancing. Greed trades still abound with foreign buyers looking for value in Chinese equity and high yields. Retail portfolios are usually the last to react even as we hear of some losses looming in the TARN products sold by mostly the HK, Taiwanese and Korean banks (Singapore, not excepted).

The market is, in general, unprepared for the 6 month time frame of the Fed, most choosing to believe it is a random number that flew into her head and that we can optimistically expect the time line to be pushed out into the future if things sour up. If we live for the hope of things souring out for a delay in rate hikes, doesn’t the whole picture seems a little counter intuitive to economic optimism ?

It is almost as if we are living past the present and fast forwarding into the future when all the current reforms will be bearing fruit.

Singapore Rates

I will be writing a piece on the Singapore rate outlook soon because MAS’s monetary policy statement is coming up early/mid April. Basing off the FOMC and the USD outlook, we should expect the SGD policy response to be in line. But this time, I am not so sure about the short term rates anymore.

Singapore bonds

HDB launched a successful 7 year bond yesterday at 3.008% (7 year interest rate swap at 2.28% today) which makes the recent Capitamall Trust 7 year (3.02/2.98%) look expensive. The issue size was increased from SGD 600 to 750 mio in a sign of market demand for good quality paper even though the China contagion remains well contained at the moment.

My theory is that the dynamics of the market has changed this time round and that the retail market holds a higher percentage of outstanding bonds, especially the high yield ones, which makes it easier for them to be frozen out from the action when there is a crunch. They will have to sit tight and do as they are told.

Hang in there and good luck.


OLAM 6.75 Jan-18 USD 104.74 104.74
OLAM 6 Oct-22 SGD 100.17 101.37
OLAM 5.75 Sep-17 USD 101.398 102.367
OLAM 5.8 Jul-19 SGD 101.867 102.489
OLAM 7 PERP SGD 100.715 101.475
OLAM 6 Aug-18 SGD
OLAM 7.5 Aug-20 USD 107.135 107.135

USD Bond Prices


The new HDB 3.008% 03/2021 is 100./100.15 today.


2013 SGD Bonds