BOND THREAD

[Iamderek]

If you do nothing, your biggest enemy is INFLATION. You have to do something. You cannot spend your life in fear and trepidation of equities. In order to beat inflation, since there are now restrictions on property, you have to educate yourself on equities and allocate at least some of your cash to this. The return on bonds can barely cover inflation at the present time. A few of the bond funds are doing well though. I hear of one that is so successful that it's going to close its doors to investors soon.

Schroder Asian Income Fund SGD and AUD classes are closing their doors next Friday at 5pm.

[Werther]

Derek, I agree. I just post, and people have to decide what, if anything, they make of it

Have a good weekend,

Seriously, I hv been following zerohedge and Peter Schiff for the past few years that I missed the boat. Very heartache now when I see those property which I could have afford then now appreciated so much.....

I am now telling myself since I hv waited for so long, no harm wait and see how it goes lor.

Anyway, starrynight and Derek, appreciate your input.

[phantom_opera]

Seriously, I hv been following zerohedge and Peter Schiff for the past few years that I missed the boat. Very heartache now when I see those property which I could have afford then now appreciated so much.....

I am now telling myself since I hv waited for so long, no harm wait and see how it goes lor.

Anyway, starrynight and Derek, appreciate your input.

I also follow ZeroHedge but u see I have my own interpretation ... some of them are even bullish

[roly8]

Seriously Roly... this is bad advice

what do you think of collect dividend from stocks for retirement?

[roly8]

Seriously, I hv been following zerohedge and Peter Schiff for the past few years that I missed the boat. Very heartache now when I see those property which I could have afford then now appreciated so much.....

I am now telling myself since I hv waited for so long, no harm wait and see how it goes lor.

Anyway, starrynight and Derek, appreciate your input.

who is peter schiff?

but check his latest:
Peter Schiff: Coming debt crisis will make 2008 look like a Sunday school picnic



http://www.youtube.com/watch?v=5ZTlsDepd08

[Iamderek]

Seriously, I hv been following zerohedge and Peter Schiff for the past few years that I missed the boat. Very heartache now when I see those property which I could have afford then now appreciated so much.....

I am now telling myself since I hv waited for so long, no harm wait and see how it goes lor.

Anyway, starrynight and Derek, appreciate your input.

It is important to be aware of the eventual outcome. That should not stop you from attempting to make money in the meantime. This balance of conflicting ideas can be difficult to integrate for most people.

[Iamderek]

who is peter schiff?

but check his latest:
Peter Schiff: Coming debt crisis will make 2008 look like a Sunday school picnic



http://www.youtube.com/watch?v=5ZTlsDepd08

Schiff is actually correct. But if we were to wait for the apocalypse, then we will also miss out many opportunities along the way.

[phantom_opera]

There are two things that slow the eventual collapse of ponzi money printing

First,it takes time for the world to fund alternative to USD
Second,the world needs time to find replacement for US consumers

And US are masters in bubble creation lol

[roly8]

There are two things that slow the eventual collapse of ponzi money printing

First,it takes time for the world to fund alternative to USD
Second,the world needs time to find replacement for US consumers

And US are masters in bubble creation lol

true..
not going to hold much assets or currency in USD

[starrynight]

This Currency War Business – Singapore Sitting Duck

by tradehaven This currency war business has made it possible for Romania(Baa3/BB+/BBB-) to issue a 10Y USD paper at 4.625%.
Do not be dismayed because Philippines 2021 is trading at 2.5%. That makes Romania a good deal because Philippines is rated Ba1/BB+ (Moodys/Fitch) , below investment grade.
Wrote about Currency Wars last year but things have gotten a bit overwhelming and countries are throwing in the towel.
Thailand to avoid currency fight as shadow of 1997 crisis looms New Zealand Finance Minister says country won’t enter currency war zone with "peashooter" CITI: Here's Why The World's Rich Countries Will Always Win A Currency War Mantega says Brazil won't allow over appreciation of Real My definition of a currency war is essentially the competitive debasement of a currency with reference to others, leading to a more competitive environment for exports and thus, the current account of the country.
When did this currency war start ?
I would say since China started her peg.
"As China pursued its gradual transition from central planning to a market economy, and increased its participation in foreign trade, the renminbi was devalued to increase the competitiveness of Chinese industry." Source : Wikipedia
That went on for years unnoticed. Why ? Because CNY is not G3.
To go further back, it would have been Japan and Taiwan after WWII and their drive to get their economies going and to go even further back, it was the US before Bretton Woods.
Many people would disagree with me and say that it was Bernanke who threw the first punch in this currency war with his QE printing press which I would counter as an attempt to right the decades of imbalances accumulated by the US from cheap Chinese (and BRICS) imports that brought their own manufacturing model down.
How do you weaken a currency ?
1. Peg weakness - by pegging a currency at a fixed rate or ratio to another currency or a basket of currencies such as the CHF last year
2. Interest rate cuts - cutting interest rates to compete with another currency
3. Deficits - by increasing the deficit via its current account balance or through increased spending
4. QE print machine - Treasury issues, FED buys when interest rate cuts are not possible when interest rates are ZIRP (zero interest rate policy)
Why are we suddenly taking it so seriously now ?
Because Japan = G3 is openly declaring a currency war by targetting inflation at 2%, they will depreciate via rate cuts and intervention to make sure that happens. That is a big deal if we consider the implications of the 2nd or 3rd most traded currency pair in the world.
Yes, but why did no one scream at Bernanke's QE currency war ?
Because no one thought to do so, in my opinion, as official reports never mentioned a currency angle to it. Besides, the US is not an export driven economy which slims down the chances that there will be competitive disadvantages other than reducing imports and bringing home manufacturing.
How Now, Brown Cow ?
Singapore - worse than currency war, she is a currency sitting duck. She is the only country in the world on an appreciation path (vs a basket), unless you want to count in Brazil which aggressively depreciated in the past few years and hiked recently.
SGD is managed as a NEER basket to always appreciate when there is inflation in economic growth times.
That makes Singapore an open target for the sensible investor. Keep buying the SGD and selling the JPY or USD.
From a funding angle, Singapore interest rates are about the same as the JPY and the USD. Everything is close to zero these days anyway and anything above zero you get for Singapore rates, is a bigger profit for the investor (borrow USD or JPY at 0% and lend SGD at x%), in addition to the SGD appreciation promised by the NEER slope (slope is rate of appreciation, band is the tolerance).
It will be a matter of time before the hungry hoardes come onshore.
Why are they not here yet ?
? Too busy preoccupied with the Great Rotation? Singapore's recent by election results
? Potential for economic slowdown in recent economic data
? The returns are not obvious enough to the masses with the SGD on the strong side of the NEER
or is it the MALAYSIAN ELECTIONS ??? (rumours of a regime change making its calls around)
What is the implication for Singapore ?
A country that operates on uncovered interest rate parityis asking for trouble when global interest rates are zero.
The brilliant genius of Dr Goh Keng Swee could not have foretold this scenario when the initial exchange mechanism was conceived.
Interest rates will have to go to -2% for the SGD to be competitive. Yet we cannot have the social hazard of such an event.
Do we need it to be competitive ?
No.
There is too much growth happening on this little island running at almost full employment that a breather would be a welcomed relief. Thus the government's current efforts to slow down and restructure the economy to move up the value chain.
Killing off the laggard, low end manufacturing sector and outsourcing low end services offshore would be a good start. This will allow us to increase wages and afford the exorbitant prices for property and cars.
Who Needs SGD NEER ? We Have SGD REER ! – The Great Singapore Economic Debate ! Currency War Trades
There is a whole bunch of finger pointing articles, screaming foul at currency wars. None have suggested much.
I do not really care for most of the calls arising from the hubris of experts. We have not seen such a large scale currency war before.
Some naughty daredevil hedge funds may want to attempt the Soros attack on the pound, in reverse, to buy non currency war participating currencies till they start the devaluation game. Currencies like the AUD, SGD, NZD, NOK, CAD and likes. It is already happening to the KRW.
I would not take such a bet with central banks ready to pounce.
Yesterday's headlines.
Japan Finance Minister: Agree With G-20 Commitment to Avoid Competitive Currency Manipulation [Dow Jones] Senior US Administration Official: G-20 FX Vow Marks Start of Common FX Guidelines [Dow Jones] The safest bet would still be Gold. Not Gold vs the SGD.
How about XAU/JPY as a thought ?
I bought some XAU/EUR on Friday for a medium term punt. Will not look at it for a few months like I did the last time which allowed me to take profit at 1300 (then it shot up to 1386 !! grrrr).
As for SGD, I have my view that 1.26 is nearer than we think. But that is just my personal opinion. And I am contrarian in putting money in AUD.
So much for sitting ducks.

[roly8]

reason is singapore got nothing much valuable to export...

[starrynight]

While the G-20 and the G-7 haggle among each other, all (with perhaps the exception of France) desperate to make it seem that Japan's recent currency manipulation is not really manipulation, and that the plunge in the Yen was an indirect, "unexpected" consequence of BOJ monetary policy (when in reality as Richard Koo explained it is merely a ploy to avoid the spotlight falling on each and every other G-7/20 member, all of which are engaged in the same type of currency wars which eventually will all morph into trade wars), Europe's energy powerhouse Norway quietly entered into the war. From Bloomberg: "Norges Bank is ready to cut interest rates further to counter krone gains that interfere with the inflation target, Governor Oeystein Olsen said. “If it gets too strong over time, leading to inflation that’s too low, we will act,” Olsen said yesterday in an interview at his office in Oslo. The problem for Norway is that on one hand it, too, seeks to boost its export-business in an imitation of the beggar-thy-neighbor policies adopted by every other government, or artificial monetary union, with a printing press, while on the other, its property market which is overheating due to Norway's perceived status as one of Europe's safest money parking locations (alongside Switzerland) will merely heat up even more should the Norges Bank cut rates as it appears set to do, in order to preserve its front in the global currency war.

Olsen and his colleagues are torn between protecting exporters through lower rates that stem krone gains, and a policy that addresses an overheated property market. Western Europe’s largest oil exporter, which boasts the biggest budget surplus of any AAA rated nation, has emerged as a haven from the euro area’s debt crisis.

The krone sank as much as 0.6 percent against the euro following Olsen’s comments. Versus the dollar, it dropped as much as 1.4 percent. The krone was little changed at 7.3939 per euro as 11:57 a.m. today.

“A pronounced weakening of growth prospects, or a krone that is too strong, may over time lead to inflation that’s too low,” Olsen also said in the text of his annual speech held yesterday in Oslo. “Such development would be counteracted by monetary policy measures.”

Some will see in Norway's actions the germ of the same ruinous policies enacted by Ben Bernanke:

Low interest rates and falling unemployment have boosted private borrowing, with household debt estimated to swell to more than 200 percent of disposable incomes this year, according to the central bank. House prices, which rose an annual 8.5 percent last month, have surged almost 30 percent since 2008, almost doubling in the past decade. “Household debt and house prices are still moving up,” Olsen said. “These are the key reasons why the key policy rate hasn’t been lowered further.”

The dilemma has spurred debate on the extent to which monetary policy should target asset bubbles, or whether rates are too blunt a tool. The central bank will start advising the Finance Ministry on how much extra capital banks need to hold in their counter-cyclical buffers next month. That follows a proposal to triple minimum risk weights on banks’ mortgage assets to 35 percent and a separate recommendation to limit the use of covered bonds to finance mortgages.

“Although growth in our part of the world is weak and real interest rates are low, many banks are still operating with high return targets, which could lead to excessive short-term risk taking,” Olsen said. “Banks and their owners should accept that return on equity will be lower, but also safer in the years ahead.”

Yet while hurting domestic home buyers, a weak FX policy will certainly help home sellers and everyone else looking to flip assets for a quick gain - a process that has taken the entire developed world by storm once more - and will most certainly aid exporting mega corps such as Norsk Hydro.

Companies such as Norsk Hydro ASA, Europe’s third-largest aluminum maker, have struggled to adjust to a stronger krone, which is pushing up export prices even as demand from Europe declines. The krone reached a record on a trade-weighted basis yesterday. Demand has left the currency 41 percent overvalued versus the dollar this year, topping 12 major currencies, according to calculations from the Organization for Economic Cooperation and Development.

Olsen also said yesterday the bank has no plans to talk the currency “up or down” and no “specific” level for what too strong means.

We may have heard that one before.

“It’s appropriate to use a few years to bring up inflation,” Olsen said. “Prices for Norwegian goods have increased considerably more than consumer prices, reflecting the improvement in Norway’s terms of trade. Incomes, output and employment are rising at a solid pace.”

Few years? Hasn't Mr Olsen heard that in Japan Abe plans on talking up the USDJPY by some 20% in a matter of months, and at last check economy minister Amari had a 13,000 Nikkei target by the end of March. Surely if a central bank does not stick to such a ridiculous hourly schedule it will lose all credibility. Or something.
As for Norway, its formal entry into the global FX war will likely take place next month:

The bank left its benchmark interest rate at 1.5 percent for a fifth meeting in December and signaled it may raise rates as early as next month to cool record debt growth.

The conclusion:

Norway’s politicians, central bankers and business leaders have joined forces in a push to weaken the currency. Kristin Skogen Lund, chief executive officer of the Confederation of Norwegian Enterprise, said krone gains were the “main” reason Norway’s exporters have a cost disadvantage.

And with that we return to the regularly scheduled C-grade gameshow infomercial straight from the G-20, titled: "The FX price is wrong; or let's lie to everyone just a little more."

[starrynight]

Agreed. I really don't see most of the small electronics and manufacturing businesses surviving the next 15 years, esp. with the push to have 2/3 of the workforce in white collar jobs, and the Govt being pressured to raise the GDP per capita.

reason is singapore got nothing much valuable to export...

[starrynight]

Today's issuance:

Issuer:
Raffles Education Corporation Limited
Format:
S274 & 275 and Reg S Bearer, Fixed Rate Notes (to be issued off Issuer's Multicurrency Medium Term Note Programme)
Status:
Senior, Unsecured
Ratings:
Unrated
Currency:
SGD
Size:
TBD
Tenor:
3 Years
Coupon:
[5.80]% Area
Price:
100.00%
Issue Date:
[25 February 2013]
Maturity Date:
[25 February 2016]
Denominations
SGD250,000
Joint Bookrunners:
HSBC & UOB (B&D)
Expected Timing:
As early as today's business
Product Risk Rating:
P4

[starrynight]

This Is Not A Drill : SGD Corporate Bond Update & Raffles Education New Issue Review

by tradehaven I just got this from the grapevine.
Apparently, Reuters is reporting that the HDB 10Y new bond sale has been scrapped.
"HDB's planned 10-year bond sale cancelled
- But the bankers struggled to price the 10-year piece as the Singapore doillar SOR rates widened sharply on the back of rising US Treasury yields
- A syndicate banker said it was getting more challlenging finding investors who still have room for the HDB credit
- As the delay pushed toweards the pre-Lunar New Year holidays, the borrow and its leads decided against completing the transaction, letting the mandate lapse" Source : Reuters
The yield for the 10Y paper would be looking like 2.35-2.4%, for a credit that is as close to government bonds as we can get.
Take note that this is not the first time HDB has failed to issue after awarding a mandate. During the GFC, there was also a deal that was scrapped on lack of demand.
From HDB to 3Y Raffles Education which is likely to be a mini deal off its SGD 300 million MTN programme.
I have a bad feeling that retail investors are going to be lapping this up which is not a bad thing if you are switching out of 10Y HDB for example. From conversations with investors, I realise that 3 year is the sweet spot for investors these days (FED has pledged zero rates till 2015).
This is a SGD 300 mio market cap loss making company. 5.8% is decent considering that THEY ALSO FAILED TO LAUNCH last year at 4.875%.
I am just observing that their interest expense last year (at lower rates) is 90% of their operating income. What sort of business is this ? But not to worry, Oei Hong Leong is 5.87% shareholder for his reputation !
I would also be surprised if there is any leverage offered for this one. Keep me posted.
Good luck !

[starrynight]

Sorry for wall of text:

Several on FOMC Said Fed Should Be Ready to Vary QE Pace

By Joshua Zumbrun - Feb 20, 2013
Several Federal Reserve policy makers said the central bank should be ready to vary the pace of their $85 billion in monthly bond purchases amid a debate over the risks and benefits of further quantitative easing.
The officials “emphasized that the committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved,” according to the minutes of the Federal Open Market Committee’s Jan. 29-30 meeting released today in Washington.
The minutes showed policy makers were divided about the strategy behind Chairman Ben S. Bernanke’s program of buying bonds until there is “substantial” improvement in a U.S. labor market burdened with 7.9 percent unemployment, with some saying an earlier end to purchases might be needed, and others warning against a premature withdrawal of stimulus.
“They’re changing the debate toward when to scale it down rather than debating the point where it suddenly ends,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York. “With the economy looking more solid than they feared a few months ago, financial sector risks take on more importance.”
At their December meeting, Fed officials debated the date for ending their bond purchases, with officials “approximately evenly divided” between those favoring mid-2013 and those favoring a later end, according to minutes from the meeting. Today’s minutes didn’t indicate a discussion of dates.
Achieve Consensus

Slowing rather than stopping the pace of monthly purchases “is the easiest way to get a consensus” among policy makers, said Drew Matus, senior U.S. economist at UBS Securities in Stamford, Connecticut. “The people who will want to continue liquidity will want more purchases and the hawks will say let’s cut them off and the natural compromise is some sort of tapering.”
The Standard & Poor’s 500 Index fell 1.1 percent to 1,513.73 at 3:32 p.m. in New York. The yield on the 10-year Treasury declined to 2.01 percent from 2.03 percent yesterday. The yield has risen from 1.72 percent since the Fed announced new bond buying on Sept. 13. Gold futures extended declines.
The FOMC at its January meeting decided to continue buying $45 billion a month of Treasuries and $40 billion in mortgage- debt without setting a limit on the duration or total size of the purchases. Policy makers also affirmed their pledge to keep the target interest rate near zero “at least as long” as unemployment remains above 6.5 percent and inflation is projected to be no more than 2.5 percent.
Taper Off

A number of officials said that their evaluation of costs and benefits of the policy “might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred,” according to the minutes.
“Several others argued that the potential costs of reducing or ending asset purchases too soon were also significant, or that asset purchases should continue until a substantial improvement in the labor market outlook had occurred,” the minutes showed. The minutes don’t give the names of officials or specify the precise number holding a given view.
The minutes said that the committee would conduct a review of the asset purchases at the March 19-20 meeting. Fed officials are also considering new ways to present economic projections in their public communications. Many participants expressed interest in using their quarterly economic projections to convey information about future asset purchases and the Fed’s balance sheet, according to the record of the meeting.
‘Challenges Remained’

Participants “on the whole” said markets had adapted to the FOMC’s December decision to link interest rate policy to inflation and unemployment instead of to a date, while “a few participants stated that communications challenges remained.”
“One participant commented that some market participants appeared to have incorrectly interpreted the thresholds as triggers that, when reached, would necessarily lead to an immediate rise in the federal funds rate,” the minutes said.
“A couple” of officials said the policy would be more effective if the FOMC gave a consensus expectation for the main interest rate after the economy crossed a certain threshold.
Bernanke after the discussion asked the communications subcommittee to suggest a new way to communicate officials’ views on the policy toward the Fed balance sheet.
With inflation below their long-term goal of 2 percent, policy makers are forging ahead with record accommodation to stoke an economy that shrank 0.1 percent last quarter. The Fed has pushed the benchmark interest rate close to zero and expanded its balance sheet to more than $3 trillion.
Fed Exit

The minutes said “many participants” expressed concern about “potential costs and risks arising from further asset purchases.” Several discussed “possible complications” that additional purchases could have as the Fed begins to exit the policy, a few mentioned inflation risks, and some mentioned risks to financial stability.
“Several participants noted that a very large portfolio of long-duration assets would, under certain circumstances, expose the Federal Reserve to significant capital losses when these holdings were unwound,” the minutes said. “Others pointed to offsetting factors, and one noted that losses would not impede the effective operation of monetary policy.”
Growth in the world’s largest economy unexpectedly stalled in the last three months of 2012 as inventories grew at a slower pace and military outlays plunged by the most in 40 years.
The FOMC said in a statement after its meeting last month that “growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors.” The committee predicted the expansion will proceed at a “moderate pace.”
Break Ground

The recovery in housing -- the industry at the heart of the financial crisis last decade -- shows signs of momentum. Builders broke ground last month on the most U.S. single-family homes in more than four years, with starts of one-family homes rising 613,000, up 0.8 percent from December, Commerce Department figures showed today.
The housing rebound is spurring companies in other industries, including CSX Corp., the largest East Coast rail carrier. The company estimates 5 percent to 6 percent of its volume is “indirectly or directly tied to the housing market,” said Fredrik Eliasson, chief financial officer. “As we see that market continue to recover, we expect to see benefits,” he said during a Feb. 14 conference.
‘Fully Healthy’

At the same time, “with unemployment at almost 8 percent, we are still far from the fully healthy and vibrant conditions that we would like to see,” Bernanke said last week at a meeting in Moscow of his counterparts from the Group of 20.
The economy will grow 1.8 percent this year, according to the median estimate in a Bloomberg survey of economists. That will be too weak for much progress in the unemployment rate, which will average 7.7 percent this year, according to the survey.
While assessing the outlook for growth and unemployment, policy makers are debating the risk unconventional easing may speed up medium-term inflation or create price bubbles for some types of assets. At the current rate of bond purchases, the central bank’s record $3.08 trillion balance sheet will grow this year by $1.02 trillion.
Excessive Risk

Fed Governor Jeremy Stein said this month some credit markets, including leveraged loans and junk bonds, show signs of potentially excessive risk-taking. The asset purchases could also complicate the central bank’s strategy to return its balance sheet to more normal levels. The Fed in 2007 held less than $900 billion in assets.
Kansas City Fed President Esther George said last week the central bank may trigger instability in financial markets when it starts selling bonds.
The Fed’s plan for selling securities “could be potentially disruptive to markets and market functioning,” George said in a speech at the University of Nebraska-Omaha. “These actions are untested by the Federal Reserve and could cause an unwelcome rise in mortgage interest rates.”
To contact the reporters on this story: Joshua Zumbrun in Washington at [email protected];
To contact the editor responsible for this story: Chris Wellisz at [email protected]

[Iamderek]

Stocks had their biggest sell-off thus far this year.

Gold is at $1560 and Silver below $30 - both getting hammered.

Someone try to crash the WTI futures market - trading halted for 10 seconds.

Smells like a case of reverse psychology. I don't completely buy the idea that gold and silver's time is over. Smells more like your big boys positioning for something that is bullish for these two.

No need to press the panic button yet. Federal Reserve is all-in on monetisiation - mere hint of any removal sends ALL asset classes dropping.

[roly8]

where do you think gold will correct to?

[phantom_opera]

Soros must have a man in FOMC
Master of the universe decides to moderate market sentiment and signal 10y TST of 2.3pc and testing market only

Oil is still ok mah

[phantom_opera]

where do you think gold will correct to?

if Fed is serious and really stop QE Infinity this year then gold could drop to 1400 vs Dow 14k (or it could even go as low as 1300 vs 13k) ... I don't think stock will be seriously affected but Gold will bear most of the hit (Soros seems to know it b4 it comes lol)

[starrynight]

Bonds In Conversation : Grinding To A Halt At Crossroads

by tradehaven Wealthy Friend's 25th marriage anniversary coming up and I thought, 25 years ? That is a long time. Almost a lifetime and more than half my son's life time for that matter. It is a priceless fact that they have married more than half their lives and known each other 10 years before that.
The best things in life are free.
A week has passed, only 1 new issue. I am not about to cry for all the happiness around me. Yes. The less the better. Less new bonds = less supply = no rush to sell
That is as far as corporate bonds are concerned. Year to date issuance SGD 3.375 bio vs SGD 5.027 bio this time last year.
The government keeps on printing, though. SGD 1.2 bio of new 30Y bonds when the old one is dying like a dog. Maybe a fake death only to rally after the auction on the 26th ? [get your ATM cards out this weekend !] Yield target about 2.8-2.9% ? (before leverage of 90%?)
Now do not be too hasty, because you just need the yield to move to 3.25% before the margin call hits. This is a 30Y bond. Now shall we talk about perps again ? The infinite maturity bonds ?
I do not begrudge the MAS for introducing new supply now instead of succumbing to market persuasion like they have in the past, which resulted in the unnatural rally last year in bonds to record low yields, driving unfortunate retail customers to their demise in certain corporate perpertuals.
The successful launch of 3 year papers like Raffles Education is a sure sign that the market is at crossroads now. I am proud that retail investors are making a stand as government bond yields continue to flounder.
20-Feb 31-Dec CHANGE SIGB 1 5/8 04/01/13 Apr-13 0.28 0.27 0.01 SIGB 2 1/4 07/01/13 Jul-13 0.28 0.22 0.07 SIGB 0 1/4 02/01/14 Feb-14 0.26 0.22 0.04 SIGB 3 5/8 07/01/14 Jul-14 0.25 0.22 0.03 SIGB 1 3/8 10/01/14 Oct-14 0.27 0.28 -0.01 SIGB 0 1/4 02/01/15 Feb-15 0.27 N/A N/.A 2Y Jul-15 0.31 0.27 0.04 SIGB 1 1/8 04/01/16 Apr-16 0.32 0.26 0.05 SIGB 3 3/4 09/01/16 Sep-16 0.39 0.29 0.10 5Y Apr-17 0.47 0.31 0.16 SIGB 4 09/01/18 Sep-18 0.72 0.57 0.15 SIGB 2 1/2 06/01/19 Jun-19 0.95 0.80 0.15 SIGB 3 1/4 09/01/20 Sep-20 1.34 1.12 0.22 SIGB 2 1/4 06/01/21 Jun-21 1.47 1.19 0.28 10Y Sep-22 1.61 1.30 0.31 SIGB 3 09/01/24 Sep-24 1.95 1.62 0.34 15Y Mar-27 2.26 1.91 0.35 20Y Sep-30 2.46 2.09 0.38 30Y Apr-42 2.84 2.42 0.41 My outlook is slightly hazed. Between the end of QE as indicated by the hawkish FED minutes last night, the Japanese currency war going on which threatens to drag the rest of Asia (except China - suffering FDI outflows for the past 10 months) along and the Italian elections this weekend plus insurmountable structural problems in Europe, I can say the only theme that remains clear would be the theme of SLOW STAGNATING GROWTH.
An interesting read on the phenomenon of austerity link.
That should be bond positive in normal times but we are in odd times now and flows are controlled by all the mutual funds and hedge funds that have gotten too big to fail. As bankers continue to convince us that we are too dumb to manage our own money, the power shifts to the hands of a few.
My take is that the situation is threatening to erupt into a loss of confidence, as I had written for my 2013 outlook. There are various regulatory issues that are in the works such as the financial taxes in Europe and Dodd Frank regulations as well as the up-coming US sequestration (1 Mar) that have repercussions for the common folk.
I will avoid bank bonds, illiquid local currency debt, cyclicals and high yield property names that do not have sufficient cash holdings. The SNS bank ruling limbo is a huge cause for concern and that Turkish yields have fallen under Russian yields is another sign.
So good luck, keep liquid, take off those leverages opportunistically and do not write off gold yet.
I leave you with indic prices of this year's issues, Olam prices and last year's benchmarks.
RAFFLES EDUCATION Feb-16 100.04 TATA COMMUNICATIONS Feb-16 101 HDB Jan-18 99.67 GOODPACK Jan-23 99.5 KIMENG Jan-14 100.0499 HONG FOK Jan-18 100.3086 GUTHRIE Jan-18 100.502 NUS Jan-18 99.69 UNICREDIT Jul-23 97.5 BIOSENSORS Jan-17 101.25 FRASER CENTREPOINT Jan-20 100 ICICI Jan-20 99.75 HPL Jan-18 100.35
OLAMSP 6 3/4 01/29/18 SGD 94.50/96.00 OLAMSP 6 10/25/22 SGD 90.00/92.00 OLAMSP 5 3/4 09/20/17 USD 92.60/94.00 OLAMSP 2 1/2 09/06/13 SGD 99.6/100.00 OLAMSP 5.8 07/17/19 SGD 92.50/94.50 OLAMSP 7 09/29/49 SGD 84.00/86.00 OLAMSP 6 08/10/18 SGD 94.50/96.50 OLAMSP 3 02/25/13 SGD 99.50/100.25 OLAMSP 7 1/2 08/12/20 USD 94.50/95.00

Genting still under pressue on rumours the Malaysian government will be dissolved today.

[starrynight]

[roly8]

just by looking at GBPUSD..
it look so strange to me

[Iamderek]

just by looking at GBPUSD..
it look so strange to me

How so? Entire market is selling GBP.

[roly8]

How so? Entire market is selling GBP.

because of what reason?

[Iamderek]

because of what reason?

Not sure if you're serious. Terribly weak fundamentals and its competitors are making leaps and bounds in their economies.

Bank of England also signalled it is ready to ease more.

[phantom_opera]

why UK can find money to build High Speed 1 and planning for High Speed 2??

[roly8]

Not sure if you're serious. Terribly weak fundamentals and its competitors are making leaps and bounds in their economies.

Bank of England also signalled it is ready to ease more.

me just don't know much what's happening in UK..

why UK can find money to build High Speed 1 and planning for High Speed 2??

don't tell me they are going print...?

[Iamderek]

why UK can find money to build High Speed 1 and planning for High Speed 2??

Easy when you can borrow from the future. Furthermore UK is still AAA - for now.

[starrynight]

Not anymore... news from this morning

WASHINGTON: Rating agency Moody's cut Britain's debt rating Friday by one notch from the top-grade AAA to Aa1, citing slow growth and a rising debt burden.

Moody's also cut its AAA rating for the country's central bank, the Bank of England, by one step, also to Aa1.

The main driver for the sovereign downgrade, Moody's said, "is the increasing clarity that, despite considerable structural economic strengths, the UK's economic growth will remain sluggish over the next few years."

The British economy is constrained both by the turgid global economy, Moody's said, and the drag from businesses and the British government slashing their debt burdens.

Moody's said the country's recovery has proven to be significantly slower than previous rebounds from recession, and Moody's said it did not expect the situation to change.

"Moreover, while the government's recent Funding for Lending Scheme has the potential to support a surge in growth, Moody's believes the risks to the growth outlook remain skewed to the downside."

Moody's said that slow growth would retard a projected rise in tax revenues and make progress difficult for the government's fiscal consolidation program, "which will now extend well into the next parliament."

Meanwhile, the government's growing debt load would reduce the shock-absorption capacity of government finances at least into 2016.

Moody's projected that government debt would continue to rise and peak at 96 per cent of gross domestic product in 2016, much later than previous projections.

"After it was elected in 2010, the government outlined a fiscal consolidation program that would run through this parliament's five-year term and place the net public-sector debt-to-GDP ratio on a declining trajectory by the 2015-16 financial year," ratings agency said.

"Now, however, the government has announced that fiscal consolidation will extend into the next parliament, which necessarily makes their implementation less certain."

Moody's however put Britain on a stable outlook, guardedly confident that political will combined with some medium-term fundamental economic strengths "will, in time, allow the government to implement its fiscal consolidation plan and reverse the UK's debt trajectory."

- AFP/jc

Easy when you can borrow from the future. Furthermore UK is still AAA - for now.