Bonds In Conversation : Guerrilla Warfare

Heavy week in the bond markets with fates hanging on the US NFP tonight after a mostly undecipherable FOMC minutes on Thursday morning.

Some major bonds have missed payments in the first week of the year starting with China’s Kaisa which has 30 days to make good as Moody’s cut their ratings again to Caa3. Brazil’s OAS and Petrobras are also in trouble, along with Venezuela, Ukraine and now Soros says he would not be surprised if Russia went down. Dubai developer Limitless LLC and Malaysia’s almost quasi sovereign fund 1MDB have both missed payment deadlines as well.

That makes us wonder where all the money has gone, really ?

Yet investors should not worry because we have only been getting good stuff since the start of the year, starting with Philippines raising US$ 2 bio for 25 years at 3.95% ! Turkey paid 4.875% for US$ 3 bio for 28 years and and we just had Indonesia paying 4.125% and 5.125% for US$ 4 bio in 10 years and 30 years respectively.

And today, Kaisa is on a roll, with private banks leading the charge, bidding for all issues across the curve at flat cash prices of 31 – 33 cts. Good luck, folks !

Ukraine USD bonds also rose over 10% overnight after EU pledged more aid. Hip, hip, hooray.

With 10Y US yields at an 18 month low, JGB 5 year going at zero and even Australia breaking new lows in their yields, I do not think it is an even playing field anymore.

global bond yields

Because at 0%, we know that people are still making money while retail players can scarcely afford that, which has always been the way except that it has gotten much worse now.

Banks make money because they are gauged on cost of capital, sovereign wealth funds have their own agenda, central banks do not care and fund managers all play off a different benchmark that is not absolute return, unlike my personal need for absolute returns.

Do I really want to be investing in this field ? Or should I be adopting guerrilla warfare and put a bid on for Kaisa or Greece ?


In Singapore, we have only a single issue out of Fragrance Group only managing SG$ 75 mio for 2 years at 3.75% (current market 99.75/100.05).

There is nothing much to do to combat the rising short term rates which will dent finances for a while because they are unlikely to crash from current levels back to our comfort zones of 0.25%. When will banks start paying higher deposit rates ?

singapore interest rates

To add to our disgust, SGD government bonds have delivered up to 5% returns since 2 Jan this year.

singapore government bonds

Del Monte is arranging investor meetings but is likely to issue in USD and we have Religare coming up.

Religare Health Trust Trustee Manager Pte. Ltd (in its capacity as trustee-manager of Religare Health Trust) has mandated DBS Bank Ltd., Deutsche Bank AG, Singapore Branch, Religare Capital Markets (Singapore) Pte Limited, and Standard Chartered Bank to arrange a series of fixed income investor meetings in Singapore on January 12, 2015. Religare Health Trust is a business trust with a portfolio comprising healthcare assets in India, and is listed on the Main Board of the SGX-ST. A S$ Reg S senior unsecured notes offering under the recently established S$500 million Multicurrency Medium Term Note Programme may follow, subject to market conditions.

The irony is in the words of DBS at a private banking seminar, as reported in the BT, cautioning over high yield corporate bonds as risks of defaults could rise, notwithstanding that DBS has brought out quite a lot of that stuff last year.

Not referring to Singapore names, I suppose, because unbeknownst to many of us, Vallianz did a small private placement for USD 22.5 mio (at issue price unknown), a senior perp probably at 4% with a call in 01/2018 at 100. Interesting. For all we know, the issue price could well have been 90 cts.

Cracks continue to show as UOB sues property giant, Lippo Group, after suffering 37 out of 38 defaults in yet another Sentosa unit. Tut, tut, tut, UOB !! Something wrong with your in-house systems ?

I think we are in for interesting times and I stick to my call of preaching patience for investors and active guerrilla warfare portfolio management for the rest.

And it does look like Bill Gross has nothing to lose this time when he predicts that 2015 will be awful.

Bill Gross, bond king, ousted executive, self-styled poet of the markets, has a bold, depressing prediction for 2015, and he’s not couching it in any of his usual metaphor: “The good times are over,” he wrote in his January investment outlook note. By the end of 2015, he goes on, “there will be minus signs in front of returns for many asset classes.”

Good luck !

USD Asians Indicative Prices


SGD 2014 Corporate Bonds (Indicative prices)


SGD 2013 Corporate Bonds (indicative prices)