Bonds In Conversation : Happy Animal Spirits on Friday the 13th

A 91th minute goal to give Brazil a 2 goal advantage win. Ahem. Just as we would expect from the markets and central banks, go for the popular consensus.

Referee = central banker ? And the popular result will prevail (forgive my celebratory mood).

It’s been a central banks week that will carry on into the FOMC next week. Markets have been well behaved and slow with the soccer World Cup kicking off this morning, Singapore time, and we have the summer approaching.

Markets are worried about the following.
1. Thailand
2. Iraq and oil price
3. China and her geopolitical and economic risks

Well, I am a drone fan and I do not think Iraq is anything a few drone bombers cannot handle, minus the collateral damage and dead kids. Thailand is again nothing much with a new government and new bribes to pay as they rush to kick start every single project they can (minus their personal fees) and we should see torrid growth to come soon. And China ? Do we really know China when every single company has 3 sets of accounts ?

Then there are the good risks.
1. Central bank easings – ECB
2. More central bank easings – BoJ

Small risks – RBNZ hiked rates and BOE cautioned that they will hike sooner than later.

With that, bullish sentiment readings for the S&P is at a 6 month high which makes extreme sense because markets have tended to rally after 13 of the past World Cups.

Credit Markets
In terms of credit spreads, we are back to 2007 levels and junk/non investment grade has never been this delectable since pre crisis.

We saw big issues this week out of Singapore’s OCBC, again, with a USD 1 bio  Basel III compliant Tier 2 which came at 4.36% (99.10) for a 10 year bullet (current price 99.65/99.85).

June 13 (Bloomberg) — 33% went to investors in the U.S. and 13% to those in EMEA, according to a person familiar withthe matter.
• Asset managers took 57%, private banks 18%, pension and insurance funds 18%, banks 3% and corporates and others 4%, the person said, asking not to be identified because the details are private

With China’s policy measures and widening trade gap, China is back in favour after India’s recent run up. Russia is also coming back into the picture and  a fund manager i know was boasting about her Gazprom puts escapade that earned her a pretty penny.

Credit Suisse printed a Basel III 6.25% USD perpetual bond that saw hefty demand and is trading at 101.80 at the moment.

The reckless mood is warranted because I believe the world have come to a collective recognition that there is just no basis to imagine any trigger for a sell off even if US treasuries yields could correct higher from here.

Like I said, Yes, It Will Crash. By How Much ?


First week of silence in the new issuance front. Investors were mostly busy in the secondary markets taking profits on some of the new bonds – a smart move indeed.

Prices are now in the 100 to small gains zone except for Kris Energy and even Trikomsel has regained some strength.

I would like to highlight that the Singapore interest rate curve bear flattened on the week, in case readers are not aware. The short end 2-7 years rose some 0.07 to 0.10% while the long end barely changed. Thus bond prices should come off according unless the trend reverses.

Going into next week, the main draw would be the FOMC at 2 am on 19 Jun morning, Singapore time. Markets are expecting status quo and quite unperturbed and it feels quite sure that the Fed will not disappoint with any measure of hawkish sentiment to ruin our World Cup experience.

Have a nice weekend.


USD Bonds Listed in SGX and HK


SGD 2014 Issues

SGD 2013 Issues

And our wine writer, The Discerning Lush, sends her regards from Mexico or Peru or wherever she is.