S'pore investors turn to riskier bonds

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#11
(12-05-2013, 05:56 PM)weijian Wrote:
(12-05-2013, 04:23 PM)Temperament Wrote: If you hold a bond to maturity the current interest rate changes shouldn't affect you.

In THEORY, this is true.
But in PRACTICAL, I think many folks who want to hold their bond to maturity, over estimate their capability to be emotionally unaffected when their bond holding drops in price! Tongue

Ha! Ha!
Don't forget new bonds are so much better to HTM with higher spike of interest rate. Don't you want to change or upgrade to new bonds? Actually can salivate if you can't change. So bonds can be very "dangerous to invest" too.

Another example of:
"In theory , there is no difference in theory and practice, in practice, there is.
WB:-

1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.

Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.

NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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#12
how to and who set up the medium-term note programmes?
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#13
http://www.todayonline.com/business/bond...epage=true

Bond fever grips Singapore’s rich

PUBLISHED: 11:23 PM, JULY 11, 2014(PAGE 1 OF 1) - PAGINATE
SINGAPORE – Private banks are driving Singapore’s bond market to new heights as wealthy individuals clamour for higher returns, reported IFR, a Thomson Reuters publication.

Pacific International, a highly leveraged, unlisted shipping company, this week became the latest new issuer to benefit from this apparently insatiable appetite, when it sold a S$300 million 5.90 per cent unrated three-year bond that attracted S$3.5 billion of orders from 93 different buyers.

Pacific already has US$2.95 billion of debt and an annual interest bill of around US$81 million. Despite a weak outlook for the competitive shipping industry, private banks acting on behalf of their clients bought 93 per cent of the deal.

This was by no means the only bond to have drawn a crowd in recent weeks. Smaller listed companies have also pulled in big oversubscriptions. A S$75 million 4.75 per cent 3.5-year issue from construction company Tiong Seng Holdings received S$650 million of orders, while property developer Singhaiyi Group pulled in S$800 million for a debut S$100 million 2.5-year at a 5.25 per cent yield.

Surging appetite for yield is allowing more companies to come to the capital markets, giving some in difficult sectors such as Pacific International additional flexibility compared to bank loans. While the additional demand adds to market liquidity, however, market participants worry that inflated order books may be distorting pricing and leading to a build-up of credit risk.

“The private bank clients are adamant about getting their hands on the bonds because they know how hard it is to pick them up in the secondary markets,” said a debt syndicate banker.

“The PBs (private banks) inflate their orders to ensure they get at least 10 per cent of those orders, and that just balloons the entire book. Once you see a deal that is more than three times oversubscribed, you can be sure the rest is inflated.”

A giant order book typically allows a company to push for a reduced cost of funding. Pacific International, for example, squeezed the final yield on its bond by 35 basis points to 5.90 per cent, a considerable saving.

FEW ALTERNATIVES

High-net worth individuals are turning to high-yield bonds after a choppy period for the city’s stock market and government restrictions that have curbed speculative property investments. Cash rates are low, and the yield on the 10-year Singapore government bond is only 2.3 per cent.

“Yields are very low and cash returns are next to nothing,” said a Singapore-based debt syndicate banker. “Investors have to re-channel funds somewhere, and they pick high-yield bonds as the returns can sometimes match up to equity dividend yields.”

Investors also are positioning their portfolios in anticipation of rate increases. High-yielding bonds, even those with short tenors, provide them with a yield buffer compared with high-grade bonds, which are too sensitive to rate increases.

The robust demand has pushed up new issues in the secondary markets as well, as Singapore’s mainly buy-and-hold investors chase bigger allocations.

TRADING GAINS

Koh Brothers Group, an investment holding company, sold a S$50 million 3.5-year bond at a 4.8 per cent yield in mid-June and within a week the yield firmed to 4.4 per cent. The yield on a S$100 million two-year bond from Vallianz Holdings narrowed to 5.96 per cent earlier last week from 7.20 per cent when the bond priced in March.

Singapore’s wealthy individuals are also enticed by private banks that will lend up to 80 per cent of the cost of their bond purchases, although a banker from one local bank said they would only provide leverage up to 60 per cent.

Robust market liquidity has brought more issuers to market, and pushed issuance volumes up in the first half of this year, mostly since May. A total of S$11.4 billion of bonds were sold up to July 3, up from S$9 billion issued over the same period last year.

Despite the lack of high-grade issuers this year, institutional fund managers have latched on to a lucrative trend. In the past, private banks were perceived as the first to sell once their holdings turned a quick profit. But real money accounts have joined the game by selling their allocations to under-allocated private banks in the secondary markets, often earning a tidy sum.
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#14
(12-05-2013, 11:43 AM)tanlui Wrote: Sorry, if I may ask, are such high-yield bond issues available to retail invetors or only for HNWI? If available, then worth subscribing to? & how to apply for them?

You can buy into the high yield bonds through the iShares Barclays Capital USD Asia High Yield Bond Index ETF.

Full Disclosure : I hold this ETF in my portfolio
Disclaimer :-

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.

I am not immune to that, so please understand that any past success of mine will probably be followed by failures
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#15
Is there anywhere that tracks the yield and maturity of such high yield bonds?

Whats the average yield and maturity of available high yield bonds in the market nowadays?
___________________________________________________________
Finding the Value in a Speculative World
http://www.valueinvestasia.com
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#16
(15-07-2014, 03:54 PM)Shrivathsa Wrote:
(12-05-2013, 11:43 AM)tanlui Wrote: Sorry, if I may ask, are such high-yield bond issues available to retail invetors or only for HNWI? If available, then worth subscribing to? & how to apply for them?

You can buy into the high yield bonds through the iShares Barclays Capital USD Asia High Yield Bond Index ETF.

Full Disclosure : I hold this ETF in my portfolio

I would be careful about this product if I were you. I've noticed that the NAV of this ETF hardly budges, which is unnatural. Basically, many of these bonds are not liquid at all, so I would question the "NAV".

I'm not saying its a bad investment. In fact, I would buy it if its price were lower (I believe the YTM is currently about 7%ish). But due to (1) the NAV factor as I mentioned, and (2) China HY bond holdings in its composition, I would need a better yield to induce me to buy.
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#17
Anyway the ETF above is multi-ccy and is subject to fx risk.

I've even written to MAS before urging them to do more to encourage/incentivise ETF formation for Singapore corporate bonds, but basically got a non-answer from them.
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#18
http://www.businesstimes.com.sg/premium/...s-20140722

PUBLISHED JULY 22, 2014
Halcyon Agri's 5-year bonds subscribed by 16 times
BYSIOW LI SEN
lisen@sph.com.sg @SiowLiSenBT

Following the Anson acquisition, Halcyon, listed on the Singapore Exchange in February 2013, will be among the top five natural rubber producers globally - PHOTO: REUTERS
[SINGAPORE] Halcyon Agri Corp's five-year maiden bond issue was subscribed a staggering 16 times - with orders of over $2 billion received for the $125 million 5NC3 on offer, DBS Bank said yesterday. 5NC3 means the issuer will not call or redeem the five-year bonds before the third year.
Due to the strong demand from private bank clients who accounted for 90 per cent of buyers, the bonds were priced at 6.5 per cent, down from initial guidance of 6.75 per cent.
The maiden bond issuance from a commodity company like Halcyon was a welcome diversification for investors, said Rina Ooi, DBS managing director, treasury & markets. Many Singapore dollar bond deals have been by real estate companies or from the marine sector.
"This is like a breath of fresh air," said Ms Ooi. The 2.00 per cent step up margin was another incentive.
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#19
(17-07-2014, 09:02 PM)tanjm Wrote:
(15-07-2014, 03:54 PM)Shrivathsa Wrote:
(12-05-2013, 11:43 AM)tanlui Wrote: Sorry, if I may ask, are such high-yield bond issues available to retail invetors or only for HNWI? If available, then worth subscribing to? & how to apply for them?

You can buy into the high yield bonds through the iShares Barclays Capital USD Asia High Yield Bond Index ETF.

Full Disclosure : I hold this ETF in my portfolio

I would be careful about this product if I were you. I've noticed that the NAV of this ETF hardly budges, which is unnatural. Basically, many of these bonds are not liquid at all, so I would question the "NAV".

I'm not saying its a bad investment. In fact, I would buy it if its price were lower (I believe the YTM is currently about 7%ish). But due to (1) the NAV factor as I mentioned, and (2) China HY bond holdings in its composition, I would need a better yield to induce me to buy.

Hi Tanjm,

Sorry, missed this reply earlier.

Actually, I am slowly trying to implement a ETF strategy of exposure to markets as per market attractiveness.

As a part of that I need some bond exposure.

Point noted on NAV.

I suspect that most of the bonds are likely to roll over once they are due.

Yes, the exposure to China is high at 42%. But, I figure that China is due a boom in Debt and instead of holding one, this vehicle allows me to hold a bunch, chances are that if one blows up, the yield will spike up allowing the ETF provider to ladder up.

Yield is around 7% and yes, hopefully, the price falls a lot so that I can top up
Disclaimer :-

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.

I am not immune to that, so please understand that any past success of mine will probably be followed by failures
Reply
#20
Another disturbing trend that I've noticed is that banks are now willing to help "sophisticated" investors double up on their bets by lending them money to leverage up on these high yield bonds.

One wonders why banks aren't taking the trade themselves if its such a "sure-win".

Cheers,
theasiareport.com
http://theasiareport.com - Reflections From Finding Value In Asia
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