Bonds In Conversation : The Global Korban

My biggest apologies…. no SACRIFICE YET ! WAIT TILL SEPTEMBER !

Today is Hari Raya Haji PUASA in Singapore which is also known as the Eid al-Adha Fitr in the Middle East. An occasion that calls for sacrifice (korban) of sheep/livestock (in the Year of the Sheep ??!!), and it struck me that this week has been all about that.

Sacrifice Greece, China sacrifice, Fed sacrifice, ECB sacrifice, US sacrifice, Iran sacrifice/gains, Bank of Canada cuts  … all for the good of markets and we have seen a great week of optimism renewed as equities gained across the globe, most sovereign bond yields dropping and interest return to credits, both investment grade as well as junk.

What do we really believe ? I asked yesterday.

China is up another 3% today, to close the week slightly up which will hopefully boost sentiments for more investors to rush in next week.

shcomp weekly

Everything is moving too quickly. Stock markets fall, prop it up – stock buybacks and regulations. Bonds fall, talk it up. Growth slows, cut rates for currency war.

So many things to buy and so little money, what should we do ?

New Zealand will be next cut as the global dairy index falls to a 6 year low.

4 of the top 11 energy sector bankruptcies over 12 months filed in the past 7 days, including the top 2 – Walter Energy ($5 bio) and Sabine Oil & Gas ($2.91 bio) as oil prices saw their longest losing streak since Jan on a global glut that will persist as Iran releases her floodgates from now till next year with the implementation of their nuclear deal.

top energy bankruptcies

It has hardly put a dent on the demand for high yield bonds with Jeff Gundlach declaring that “high-yield bonds will be a “debacle” in three to four years, although they are a good investment bet in 2015” and that he is willing to dance the risk dance near the door and invest in junk bonds.

His sentiments are widely echoed as junk bond ETFs saw their largest daily inflows on record which does not really surprise me in this bail-out world that we live in.


We know that it is complete when the VIX “dies“, falling to a 31 month low, down 40% in a week as the S&P 500 spikes to just 10 pts short of its historic high.

spx vs vix

The highlight would be 2 Wallstreet titans sparring at the CNBC Develiering Alpha conference, each accusing each other of being a danger to markets. Larry Fink, CEO of BlackRock, expressed concern that shareholder activism is leading to companies taking debt to buyback stock instead of investing for the future, while activist share investor, Carl Icahn, claims that ETFs “sell liquidity” when, in fact, there is none.

Both true !

The US stock market is shrinking.


And liquidity can be a major problem if we count the number of funds that suspended redemptions on their China portfolios which can well happen to ETFs, especially those high yield ones which banks have little appetite to absorb.

Not a problem at the moment as USD Noble perps, Kaisa bonds, 1MDB bonds all rallied 2-4 cts on the week ! A big sign of risk taking.

In Singapore, we saw the first local O&G name, Nam Cheong, tap the market for the first time since Ezion’s issue in Nov last year. Paying 6.5% for 3 years which is more than Swiber’s 6.25% for their SGD 3 year issue last October. The coupon caused little stir in the marketplace and contagion was well contained to Nam Cheong’s secondary papers.

Religare Trust (unrated) also managed a 4.5% for a SGD 3 year, along with, new issuer Roxy Pacific.

I am not sure why SMRT bond prices edged lower, and think it could perhaps be due to the on-going bad press on their operations. Rating agencies have been mum although we saw SG banks back to Stable outlooks,  along with the Swiss.

Leaving with the indicative prices, wishing all a happy holiday and thanks to policy makers for their global Korban.

central planning

Asian Bonds



2015 SGD Bonds


2014 SGD Bonds