April Is The Cruellest Month Because Of March
4th April 2016
This post was written for www.hnworth.com, a site targeting high net worth individuals in Singapore.
Have fun reading !
********************************
Private bankers and investors alike raise their eyebrows when I tell them that Singapore corporate bonds had a poor quarter because as for all their intents, purposes and agenda, bond prices are higher.
Nevertheless, it is true if you are a credit analyst covering Singapore space because most SGD corporate bonds have underperformed the lower yielding government papers in the same period.
For in March, 10Y Singapore government bonds saw their largest rally since Jan 2008, a whopping 0.44% crash in yield that adds to the 0.34% we saw earlier in January making 1Q16 the best performing quarter since 4Q08, ignoring the 7 month rally between Mar – Sep 2011 that saw yields edge 0.99% lower. In price terms, this is a 6.5% move in the bond price that pales to the 11.4 % gain in the old 30Y government paper.
Even luckier are those who had participated in the 30Y government auction at the end of February with a 7.6% windfall for holding on to a paper for just a month ! This makes me wonder if Singaporeans know that they can participate in government bond auctions too ? For minimum lot sizes of SGD 1,000 ? And life is not just about the new capital-GAINLESS Singapore Savings Bonds.
Table of SGS price changes and profits for 2016
While we all wish we could say that global investors finally see value in AAA rated Singapore and its first world economy, Thailand and Indonesia win hands down as far as the 2016 government bond rally is concerned and the Malaysian ringgit (+10.6% year to date) outshines Silver (+8.74%) and the Russian Ruble (+8.92%) in its biggest 1 month gain since 1998, with only Gold (+15.2%) looking better in the entire universe of recognisable currencies.
Yes, Singapore is merely a follower and beneficiary of the EM bond rally this year as US and developed markets show moderate results as Thailand (BBB+ rated) spirals out of control with the lowest 10y bond yields in their history at 1.57%, making US (AAA), South Korea (AA-) and Singapore (AAA) look slightly foolish with their higher yields. All this, without having to cut rates to negative as well, noting that the Thai central bank has overnight rates at 1.5%.
Market professionals are probably the biggest skeptics out there as they make their livelihoods from market inefficiencies of Singapore, tell me they prefer the market to remain under developed. A friend of mine who is in the bond business calls Singapore a first world economy with a third world bond market.
Emerging Market Singapore
Corporate bonds issued since Nov 2015 have seen only average price gains of 1% as the Singapore markets saw their first default since Lehman Brothers back in 2008 out of Indonesian company Trikomsel in the most blatant of all defaults that tantamount to almost bond holder abuse in the latest startling development where the company backed down on promises with the sudden mysterious emergence of a “new” bond majority holder who “supports” the move, taking the Mickey out of investors and regulators.
Taking a look at the worst performing bonds in our casually assembled list taken from bonds issued in the past 5 months.
The main takeaway is that investors have lost out ! Even Temasek linked companies are not spared, led by Singapore Technologies, DBS Group and Capitamall Trust, given that DBS pulled off a coup when they replaced an old bond issue with a cheap new one, with the smallest of premiums (http://infopub.sgx.com/Apps?A=COW_CorpAnnouncement_Content&B=AnnouncementToday&F=721GCKANELXKW5LP&H=e40a96a6f0cb40eac6d1c30abc9d635e0aedc8a8a8683c6e52df84a103347c52) for the new issue, a mere 0.18% higher than swap rates, which subsequently widened out at an opportunity cost to the investors.
To continue reading…..
April Is The Cruellest Month Because Of March
4th April 2016
This post was written for www.hnworth.com, a site targeting high net worth individuals in Singapore.
Have fun reading !
********************************
Private bankers and investors alike raise their eyebrows when I tell them that Singapore corporate bonds had a poor quarter because as for all their intents, purposes and agenda, bond prices are higher.
Nevertheless, it is true if you are a credit analyst covering Singapore space because most SGD corporate bonds have underperformed the lower yielding government papers in the same period.
For in March, 10Y Singapore government bonds saw their largest rally since Jan 2008, a whopping 0.44% crash in yield that adds to the 0.34% we saw earlier in January making 1Q16 the best performing quarter since 4Q08, ignoring the 7 month rally between Mar – Sep 2011 that saw yields edge 0.99% lower. In price terms, this is a 6.5% move in the bond price that pales to the 11.4 % gain in the old 30Y government paper.
Even luckier are those who had participated in the 30Y government auction at the end of February with a 7.6% windfall for holding on to a paper for just a month ! This makes me wonder if Singaporeans know that they can participate in government bond auctions too ? For minimum lot sizes of SGD 1,000 ? And life is not just about the new capital-GAINLESS Singapore Savings Bonds.
Table of SGS price changes and profits for 2016
While we all wish we could say that global investors finally see value in AAA rated Singapore and its first world economy, Thailand and Indonesia win hands down as far as the 2016 government bond rally is concerned and the Malaysian ringgit (+10.6% year to date) outshines Silver (+8.74%) and the Russian Ruble (+8.92%) in its biggest 1 month gain since 1998, with only Gold (+15.2%) looking better in the entire universe of recognisable currencies.
Yes, Singapore is merely a follower and beneficiary of the EM bond rally this year as US and developed markets show moderate results as Thailand (BBB+ rated) spirals out of control with the lowest 10y bond yields in their history at 1.57%, making US (AAA), South Korea (AA-) and Singapore (AAA) look slightly foolish with their higher yields. All this, without having to cut rates to negative as well, noting that the Thai central bank has overnight rates at 1.5%.
Market professionals are probably the biggest skeptics out there as they make their livelihoods from market inefficiencies of Singapore, tell me they prefer the market to remain under developed. A friend of mine who is in the bond business calls Singapore a first world economy with a third world bond market.
Emerging Market Singapore
Corporate bonds issued since Nov 2015 have seen only average price gains of 1% as the Singapore markets saw their first default since Lehman Brothers back in 2008 out of Indonesian company Trikomsel in the most blatant of all defaults that tantamount to almost bond holder abuse in the latest startling development where the company backed down on promises with the sudden mysterious emergence of a “new” bond majority holder who “supports” the move, taking the Mickey out of investors and regulators.
Taking a look at the worst performing bonds in our casually assembled list taken from bonds issued in the past 5 months.
The main takeaway is that investors have lost out ! Even Temasek linked companies are not spared, led by Singapore Technologies, DBS Group and Capitamall Trust, given that DBS pulled off a coup when they replaced an old bond issue with a cheap new one, with the smallest of premiums (http://infopub.sgx.com/Apps?A=COW_CorpAnnouncement_Content&B=AnnouncementToday&F=721GCKANELXKW5LP&H=e40a96a6f0cb40eac6d1c30abc9d635e0aedc8a8a8683c6e52df84a103347c52) for the new issue, a mere 0.18% higher than swap rates, which subsequently widened out at an opportunity cost to the investors.
To continue reading…..
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