DARK TUESDAY ALERTS : ANOMALIES IN SGD CORP BONDS – MEDCO AND GITI
Not intending to spread panic on a Dark Tuesday after Black Monday, but I would like to point out to readers some anomalies in SGD corporate bond prices.
S&P Revises PT Energi Mega Outlook To Neg, ‘B’ Rtg Affirmed
“GITI SGD bond was priced sometime in Nov last year at 6% vs an indicative coupon level of 6.125%. At that time, Gajah Tunggal was still a healthy 99.5 on its USD bond price.
What I said then : ” given that Gajah Tunggal is an integral part of the group’s finances, I would not price the bond any less than a token discount to Gajah Tunggal’s yield.””
It has gotten worse this week.
Gajah USD bond price is at new lows.
And GITI TYRES has been inured to the 1. Gajah, 2. the Chinese equity crash as well as 3. the 6 year high in 3 year interest rates !
Verdict : BIG TIME CAUTION !
There is also the case of Tata Steel mentioned last week and China Fishery USD 9.75% 2019 which has crashed to about 60 cts when Pac Andes is still at about 90 cts.
Note that 1-3 year interest rates are at 6 year highs so do not expect bond prices to hold even if banks tell you that their offers are unchanged and Business Times publishes a nerve calming piece like this….
“SINGAPORE bond investors are doing pretty well as prices remain resilient amid the stockmarket rout.
My advice is that if they say “The Markit iBoxx Singapore corporates total return index stood at 113.5925 last Friday, just fractionally off the all time high of 113.6704 reached on Aug 11.”
MAYBE IT IS TIME TO SWITCH OUT OF SINGAPORE CORPORATES WHILE YOU HAVE A CHANCE ?