Bonds In Conversation : Did The Straw Break The Camels' Back ?

Another fun week of full blown comedy starting with the Greek elections where any party will do except for the incumbent like we have seen in all the other elections last year.

Markets quickly forgot about Switzerland and moved on to GREXIT, egged along by the indecision on oil, whether Goldman’s $40 is more credible than OPEC’s Badri calling for $200 in a few years.

In the meantime, yields got even more negative in Europe and US bonds rally to close higher for the 4th month running.

Euro government bonds at negative yields Source : Zerohedge

Euro government bonds at negative yields Source : Zerohedge


And junk is out of fashion as WSJ reports that just $13.4 billion new junk bonds have been sold in the U.S. this year, down from $22.7 billion at this time last year

Apple and India both at new record highs as China slows even more, evidenced in Caterpillar’s disastrous earnings. Strangely, big oil is unfazed, as earnings at Halliburton and Baker Hughs beat estimates.

The rest of the earnings out of Yahoo and Ali Baba, Yahoo’s main reason for profit, cast a pallor over the NASDAQ and on the shoulders of Apple. Alibaba and the war of words with the Chinese authorities is not helping.

Warning signs erupting in Venezuela and Malaysia. Malaysia’s Khazanah looks to sell a  2% stake in Tenaga, the state power company and Venezuela’s President desperately seeks financing.

Central banks were up to no good again with Singapore’s MAS coming out with an 11th hour surprise change to their policy before the FOMC meeting while Malaysia and Thailand held their ground before Denmark cut a 3rd time negative yesterday, to the credit of their minor EUR peg, and Russia with a whopping 200 bp today after they were cut to junk by the S&P. And we have an RBA member saying they will most certainly cut next week.

The Federal Reserve came and went, quite upbeat but without QE or rate hikes, the USD continued to soar although the probability of the rate hike has been shifted all the way to October.

taken from Ed Matts of Capital Management

taken from Ed Matts of Capital Management


At the recent World Economic Forum
“Central banks, said Harvard University economics professor Kenneth Rogoff, are surely the greatest source of uncertainty in the eyes of the financial markets..”

I shudder when I read CNBC making a case for buying into negative yields – for the FX effect because it is also really scary that the ECB, unlike the Fed in their QE, will be buying a trillion dollars worth of mostly negative yielding bonds.

The world will take a more than healthy interest in FX this year, for sure. Just like the no brainer junk bond trade of early 2014 which incidentally is making a nice come back this week, due to the lack of supply, lack of defaults and the nice come-back in Kaisa today.

We are seeing lows in most currencies, SGD, CAD, AUD, MYR and more at 5 year lows and the Turkish lira at historic high and the ruble rising again.

It’s no wonder  no one is paying much attention to those bonds.

The HYG US high yield ETF is trading at a 1 month high in price and the Singapore market is stirring back to life again with 4 new issues this week out of Gallant Ventures, Guocoland and International Healthcare Corp (IHC), all with big retail support.

Enquiries have returned but prices remain wide and bids are hesitant. We should still expect more fall out as bankers remain pessimistic after last year’s spate of issuance.

Singapore government bonds continue to outperform, rallying hard on the week along with US treasuries after the FOMC assurance.


More central banks next week to disturb the peace and so I shall hold my own peace and leave you with the indicative prices, along with a photo of my great accomplishment today – a larger than tennis ball sized pineapple tart !!

mother of tarts 1

USD Asian Bonds Indicative Prices


SGD 2015 Bonds (indicative prices)


SGD 2014 Indicative Bond Prices