Bonds In Conversation : The Truman Show

It has been a truly strange week.

What was supposed to happen did not happen – no Russia embargo, no China default. We had 2 new plane crashes, new historic highs in the S&P and alot of blind faith.

The week has left me feeling like markets are playing out an episode of the Truman Show which I just watched with my son because he is on the subject of dystopia in school and then we went on to watch the Matrix too.

The similarities are uncanny.

Controlled environments. Perfect conditions. Unwary subjects.

I think the world has become inured to the idea of failure, choosing to gloss over failings and cracks in the system that even Mr Nice Guy former US Treasury Secretary Timothy Geithner sees that the pricing of risk these days is “implausibly benign”.

IMF is slashing US growth expectations again and economic data has been disappointing as evidenced in the Citi Economic Surprise Indices which I mentioned 2 days back.


The biggest macro trend right now according to JP Morgan is the rotation into Europe and EM with European High Yield receiving a record inflows of almost 19% of AUM in 1H14 alone. EM fixed income has completely reversed their outflows and are in positive inflow territory for the year so far. Muni bonds are also in favour seeing inflows at last.

Despite the expectations that equity would be in play, bond inflows are outstripping equity flows so far, which means that the stock market records are not enjoyed by the majority.

For July, Junk (High Yield) bonds are currently set to return their worst monthly return in a year after the exuberance of the macro flows mentioned above.

Thus it has been a quiet week for junk issues except for Singapore where we saw 5 new issues hit the street in succession, 3 of which delivered >6% in coupon yield and all seeing overwhelming demand with order books several multiples of the issue size.

Like was mentioned in our post, Uncertain Times, bonds, particularly high yield bonds, are the riskier asset class. If we consider market positioning, bonds are heavily overweighted over equities. Additionally, we have the direct impact of expectations of rate hikes on bond prices.

That brings me back to my thoughts in early July on the cost of this perfect market engineering which I concluded in mid July that will lead to an apocalypse of sorts in the future.

In the Truman Show, the comedic sadness of watching Jim Carrey discover that his perfect life was not real makes you almost wish you were living obliviously inside the perfect world of the Matrix instead.

I will be taking a 2 week hiatus as of this Sunday and going to ……..”Norway has taken exceptional security measures after being informed of a possible imminent “terrorist attack” by militants who have fought in Syria, the country’s intelligence chief said Thursday (July 24)” (Thank you Channel News Asia !)

Apologies that you will not be getting new issue reviews from me during this time or bond prices but I urge folks to publish news and updates on the Forum pages or in the Comments section.

Wish me luck with those polar bears !

USD Bonds Listed in SGX and HK


2014 SGD Bonds


2013 SGD Bonds