Bonds In Conversation : Lightning Strikes Twice

I was going to start with snitching about Brokeback Mountain (ban ! ban ! ban !) to cap this action packed week that has come to a gruesome end when news broke of the MH plane crash last night.

Who says lightning never strikes twice with poor Malaysian Airlines ?

It is a good time to question our beliefs now as we scan the media to point blame.

Logic tells me that the obvious culprit will be made the scapegoat which could be far from the real truth. Yet the scapegoat who is the most to lose could possibly be innocent.

Why would Russia want to jeopardize themselves when they know they have no means of defense against CNN’s, CNBC’s and the Bloomberg’s out there ?

Suddenly Yellen does not seem important, especially to me, because we will be flying off to Europe in a week !! And they have decided to reroute flights over IRAQ !!

Yes. I have come to a long deserved holiday (which I had absent mindedly booked last Oct) and no thanks that I will be flying over enemy territory to get there.

flight detours

[Just struck on a brilliant business idea to sell baby disposable parachutes for air travellers that fit into the hand carry luggage or can be strapped on board]

Broad themes of the week is still bond friendly after Janet Yellen’s Humphrey Hawkins testimony on Tue and Wed. Highlights to note would be her observation that “some lower rated corporate debt values appear stretched” and  “Signs of risk-taking that could leave parts of US financial sector vulnerable to adverse events have risen modestly from subdued level”. Her written testimony also mentioned tech stocks, but all to  little avail as the market, stocks and bonds,  rallied to a new high on the assurance of easy money policies.

Fund managers are sounding the alarm bells on market levels at the Delivering Alpha conference in New York where Icahn, Druckenmiller and gang lambasted the Fed’s complacency.  This is probably a good sign because we did not hear anyone complaining before the Lehman crash and why wouldn’t anyone want to make more money ?

Yet, they are probably right and some investors are not waiting and have  yanked $620 million from the two biggest high-yield bond ETFs last week.

Stocks are not excepted as Bubble Paranoia Setting In as S&P 500 Surge Stirs Angst in Poll
“Two years of uninterrupted gains in U.S. stocks are sowing anxiety among financial professionals, with three in five saying the market is on the verge of a bubble or already in one, the Bloomberg Global Poll found.”

Most earnings beat estimates this season with every bank outperforming the market estimates, needless to say for I could have told you that banking is really the business of accounting.

The credit downgrade of Mongolia and latest Huatong default in China had little impact on credit markets.

I believe that there is a certain mood of complacency that is warranted and the result of central banks’ actions. By the Fed’s vague views of a “not yet complete” economic recovery and  monetary policy “needed to continue to promote the favorable financial conditions required to support the economic expansion”.

Given the sublimity of the geopolitical situation, the chase for yield may come to a cease-fire as Ali Baba postpones their IPO once again, as lightning strikes twice for them,  which speaks volumes for the case of risk appetite.

How to deal with geopolitical risks :

In Singapore, we have none of that, in our complacency, as Olam hits the street hard and fast with their first bond issue in over 18 months. The issue was quickly lapped up by private banks even as it was priced at its tightest ever.

We also saw a highly successful Perisai Capital re-opening of their 2.5 year paper at 100 which yielded 6.875%.

(Note that the well received issue, Geo Energy, appears to have run into a bid problem.)

The week ended on a high note with 2 high grade issues out of HDB for a 10 year which was upsized by 200 mio and a Bank of Communications HK branch 3 year paper that was doubled in size to 100 mio.

Leaving on a sombre note.

USD Bonds Listed In SGX and HK


SGD 2014 Issues


2013  SGD Bonds