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. https://tradehaven.net/market/tired-markets-what-do-we-really-believe/
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.
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.
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. http://www.bloomberg.com/news/articles/2015-07-15/gundlach-says-junk-bonds-will-be-debacle-in-3-to-4-years
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.
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. http://www.reuters.com/article/2015/07/15/us-etfs-blackrock-icahn-idUSKCN0PP2SC20150715?feedType=RSS&feedName=businessNews
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.
2015 SGD Bonds
2014 SGD Bonds
Today is Hari Raya Puasa not Hari Raya Haji. The latter is in Sept this year.
Horrified !!! Got it mixed up !! Such a bad non Muslim, I must be !
Many thanks for your great articles. I have always been a fan.
From the SGD corporate bond prices that you have shared, i saw that swiber’s bond price has fallen to around $80 – most probably due to the fact that Swiber has a few bonds which will matured in the next 1~2 years, and also the low oil prices which will come under pressure due to Iran’s nuclear deal. Can i seek yr view on Swiber’s bond? In your view, do you feel it’s worth the risk to buy now?
Can you guide me on how i could check the current bond prices? Do i always need to go to the bank to check it?
Many thanks and appreciate the advice.
The price is an indicative price and I am really not sure how much the bank will spread you for it. I suggest you leave an order to buy with your banker and see what they come back with, at a price you are comfortable at. Unfortunately, I cannot advise on the risk aspect because this site does not have a financial advisory license.
Incidentally, Swiber has been buying back their papers in small amounts eg. $0.5 mio of their 9.75% perp last month which is encouraging. The company expects business to pick up in the second half after horrendous 1Q results.
Current prices are not readily available for most people including myself too. We will be launching a new site soon and you will be able to use the forum to ask for help etc.
Thanks for your support !!
Hearing that Swiber 7.125% 04/2017 is 64-74 ( 36.9/26.73%).
Good luck !
Many thanks for your reply again. Really appreciate this. I called Maybank this morning, and they provided the price of 5.125% (2016) at 91.05, 7% (2016) at 91.05 and 5.55% (no offer). I’m think if i should subscribe to the url cBond for good reference to the price.
Swiber needs to redeem 300M next year … i believe that’s the reason to why their Swiber 7.125% 04/2017 is 64-74 (if they can somehow refinance it, i’m inclined to take the risk.
Perhaps they are offering you what their cost price is ?
Perhaps you should call another bank ?
Can i seek your view? Why would Swiber want to spend their fund to repurchase the perpetual security when they should reserve the fund to handle the 3x 2016 bonds total nearly 300M? Swiber has only around slight more than 100M cash and equivalent and might need to raise another rights issue to redeem the 3 bonds next year. There is no urgency to repurchase the perpetual security. Thanks
Well, maybe because the perp is due to be called on 25 Sep 2015 and if they do not exercise the call, the coupon would be re-fixed at 13.79% (as of today) and imagine how much they would have to pay for new money after that ?