Bonds In Conversation : This Time It’s Different

We all knew this week was going to be a hairy hair raising one, markets highly indecisive or rather, confused, by all the central bankers and their speeches that saw equities fall then rise then fall again.

This is what happens when you have been there, done that and are doing it again.

It is not the same.

This time is different. And it is not because I could not get that Nexcare reusable carbon filter mask at Guardian this morning (after re-reading Hotzone, it seems that healthy monkeys in the adjoining room caught the virus without contact ….) or the fact that this stock rallied about 100% in the past 3 days.

Lakeland Industries, Inc. manufactures and distributes disposable and reusable protective work clothing.   The Company's products are used in the chemical,  petrochemical, health care, automotive, glass, cement, asbestos/lead abatement, waste management, and other industries.

Lakeland Industries, Inc. manufactures and distributes disposable and reusable protective work clothing.
The Company’s products are used in the chemical, petrochemical, health care, automotive, glass, cement, asbestos/lead abatement, waste management, and other industries.

Not so lucky for Airlines, Hotels, Insurance though…

IMF is busy busy trying to cover their tracks in a wave of sweeping downgrades for the world (except US and UK – unchanged, Spain, Canada and Mexico – positive !).

Source : RBS

Source : RBS

A perfect dog for Lagarde.

lagarde doglagarde dog 3

We had the great Non Farm Payrolls last Friday before the IMF move on Monday. Then FOMC minutes came to cast more confusion appearing more dovish than expected leading to the S&P 500 making a perfect backflip that lasted for just 1 day before reversing back yesterday the minute Draghi opened his mouth.

garden gnomeyellen






S&P Change of heart

This reminds me of the time last year when the USDJPY (& Nikkei) crashed everytime the BoJ/Abe came out to talk.

An old chart from Oct 2013 – note that the BoJ meetings always led poor USDJPY lower (ie. bad news).
jpy and boj


This time is different.

Our starting point now is at the Highs for equity markets, Lows for credit and junk bond spreads, crapping commodity markets which is bad for EM (except for Coffee +100% ytd and meats – cows and pigs) and ballooning central banks balance sheets (except for the ECB which will be buying their 1 trillion soon and the Fed will taper off by next month though I am not sure if they will reinvest coupons) which look pretty exhausted.

central bank balance sheets

Animal Spirits are ruling the markets and will continue to as we wait as anxiously as first time mothers before birth ?

We are running ahead of ourselves because err, we are not in a recession yet, you know. It is just expectations of low inflation and low growth which has not happened and central bankers cannot do anything about things until they see some evidence which means we will be sitting on bated breaths for the time being.

I envisage the next thing to pop is credit and a liquidity crunch to come even as 10Y US treasuries are at their year low in yield at 2.31% (actually at levels not seen since Jun 2013).

High yield credit spreads are at their 12 month wides.




EM Credits are holding well which could be the last chance to bail as Citi notes that if the 1997 scenario of worsening commodities (and oil) and a strong USD plays out, EM bonds and FX would do poorly against the S&P although we need a crisis of sorts to trigger that event.

Markit EM CDS Index

Markit EM CDS Index


I am not sure of America these days given that China has finally overtaken the US in GDP on purchasing power terms.

And some the former basket-case countries are swimming in bond heaven even as African nations continue to print and UK starts marketing as the first western country for a CNH bond issue.


Only 2 bankruptcies this week – Espirito Santo Financial Group and that Apple phone screen maker, GT Advanced Technology.

In Asia, we have market waiting on the flood of Cocos out of Chinese banks which are finally coming around. The first is from Bank of China which is suggesting 6.5-7% yield.

Bad news is that it “may push up high-yield borrowing costs in Asia as investors sell to make room in their portfolios for the deal….”, according to Morgan Stanley analysts.

Meanwhile Chaori Solar is giving investors 20 cts back ! So all is not lost. Their default proposal is to restructure the bonds from a dollar to 20 cts.

And back in Singapore, it has been deals galore with no less than 4 new bond issues in 1 day yesterday, setting a record for the year, I suspect.

Favoured by private banks are still high yielding familiar names with LEVERAGE.

A shocking discovery I made is that banking professionals (let’s say the RMs) err, use a strange method of evaluating bond value – Loan Leverage ratio.  [MAS, are you reading this ? I know the FBI/NSA should be, at least ! – Call me, will be happy to run a course for you]

So we have Swissco, United Energy, SMRT, Chip Eng Seng and CDL. King Wan and LOYZ to follow.

Meanwhile rates have fallen quite a bit. The SGD interest rate curve has flattened with the 10Y back to its 12 month lows while the 5 years and below are holding tightly onto their gains.

That is a bad sign especially if you put it in context of this new flash today.

Singapore Condo Builders Brace as $19 Billion Due

“Singapore’s listed developers and real-estate investment trusts face their heaviest burden of near-term maturities on record just as home prices drop.

The 80 property companies on Singapore’s stock exchange reported a combined S$23.5 billion ($18.5 billion) of borrowings that have to be repaid within a year in their latest filings, Bloomberg-compiled data show. The looming debt wall comes as the vacancy rate for condominiums soared to the highest since 2006, pushing prices to the lowest in almost two years, according to data from the Urban Redevelopment Authority.”

Volatility will continue to prevail in such times as we head into next Tuesday with the MAS to release the Monetary Policy Statement along with Singapore’s 3Q14 GDP numbers where 1% QoQ and 2.7% YoY growth is expected.

I have to go get those masks and disinfectants and food now.

Have a nice weekend ahead.

USD Asian Bond Prices (Indicative)



2014 SGD Bonds


2013 SGD Bonds