Bonds In Conversation : Don't Know The Way In A Slow Race

Friend got into a taxi at Kheam Hock Road and asked to go to Gleneagles Hospital and the cabbie did not know the way.

Up from my vantage point at the top of the flyover, I could see 3 cars, taking up 3 lanes in a race to be slowest that was causing traffic to back up about half a kilometre.

Don’t we assume that all transport service personnel should know their way to the nearest police station or hospital ?

Don’t we assume that slow cars should stick to the left lanes ?

It is like the markets for me this week, raring for a rally but really struggling without direction led by a desire for profits and conveniently using Europe as the big excuse for interim which has resulted in whopper rally to new highs for US stocks and 10 year US yields to break through the 2% cloud cover.

This week we see another central bank joining the negative club, Sweden’s Riksbank with their own QE programme.

THE DIFFERENCE FOR 2015 is that the major Central Banks Will Be Buying More Bonds Than Issued This Year. And Fed’s Plosser estimates it will take another 5-10 years before their balance sheet is unwound.


Switzerland made a new record for the world’s cheapest borrowing costs for any 10 year government bonds.

The heat is off corporate bonds this week and Moody’s noted that “A major, but largely unnoticed, development has been a plunge by the US composite speculative grade bond yields despite sharply higher US Treasury bond yields….a correction of an earlier overcompensation for default risk…”

Investors really have little options available.

And it just makes failure an almost impossibility at this rate even as debt continues to pile up, growing $ 57 trillion since 2007.

global debt gdp

Despite how it looks, Singapore is in the safe zone with McKinsey pointing out the risks in household debts of Australia, Canada, Denmark, Sweden, the Netherlands, Malaysia, South Korea, and Thailand.

But the small picture is definitely for another run in US stock markets as the S&P 500 sets another historical record high and the 10 year US bond yield broke above 2% for the first time since 5 Jan.

Now that Ukraine story is over, with the IMF stuffing money (17.5 bio)  down their throats (no mention of the missing 20 bio of Gold), Greece coming along nicely and no new plane crashes, there is little in the way of a risk on rally on the back of concerted QE efforts and currency devaluations that is even giving cheer to oil prices.

It is all good for the time being even if directions are misplaced and the slow cars are moving out of the way to go risk on into the lunar new year.

In Asian space, Evergrande Real Estate pulled off a US1 bio tap of the market at 12% for 5 years, down from its initial target of $1.5 bio. The bond price closed the week higher on the credit market rally although Kaisa bonds are lower despite Moody’s putting them up for an upgrade.

KAISA USD 8.875% 03/2018

KAISA USD 8.875% 03/2018

Worries over the next coupon payment due in March is capping prices which means market will be punting that for the next month.

Singapore continues to be plagued with SIBOR worries as 2 year rates edge to their highest since Jun 2010 along with 6M SOR as the USDSGD holds at 1.35, briefly breaking 1.36.

2y irs 6m sor usdsgd


Government bonds are lower ahead of a 30 year bond auction this month end (25 Feb) to be announced the coming Monday.

The higher rates are allowing names like Guoco to do a quick retap of SGD 50 mio for their recently issued 3.6% 2 year paper. Bond demand is still mixed and restricted to local investors given the pessimism in the SGD currency.

I am not that bearish.

Enjoy the last weekend of the Chinese Horse year.

USD Asian Bonds Indicative Prices


2015 SGD Corporate Bonds Indicative Prices


2014 SGD Corporate Bonds Indicative Prices