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Thread: BOND THREAD

  1. #1621
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    Vista Land

    Yield guidance at cost: 7.75% area
    Expected Issue Size: USD 150mio – 200mio
    Denomination: USD 200k x 1k
    Risk Rating: 4N
    LV: 0
    Issuer: VLL International Inc.
    Guarantors: Vista Land & Lifescapes, Inc. (Ticker: VLL.PM), Brittany Corporation, Camella Homes,Inc., Crown Asia Properties,Inc., Communities Philippines, Inc., Vista Residences, Inc.
    Offering: Senior Unsecured Fixed Rate Notes
    Format: Reg S Registered
    Rating: Unrated
    Use of Proceeds: Refinance existing indebtedness, partially finance capital expenditures and for general corporate purposes
    Details: English Law, SGX-ST Listing, Denoms: US$200,000/US$1,000
    Sole Global Coordinator: HSBC
    Joint Lead Managers and Bookrunners: DBS Bank Ltd., HSBC
    Domestic Lead Manager: BDO Capital & Investment Corporation
    Timing: As early as today

    Comparables: Vista 6.75% 10/2018 – YTM 7% area

    Brief Description of Vista Land:

    Operating through its five distinct operating subsidiaries, Vista Land is the leading homebuilder in the Philippines. In 2011, 2012 and 2013, the Company recorded consolidated revenues from real estate sales of 13,513.4 million peso, 16,335.6 million peso and 20,024.6 million peso, respectively. Vista Land provides a wide range of housing products to its customers across all income segments. Since it commenced operations, Vista Land has built more than 250,000 homes over 3,253 hectares of land.

    Vista Land harnesses more than 35 years of professional expertise in residential real estate development and believes it has established a nationwide presence, superior brand recognition and proven track record in homebuilding. Its projects include master-planned developments and stand-alone residential subdivisions which offer lots and/or housing and condominium units to customers in the low-cost and affordable, middle-income and high-end market segments. The Company has developed numerous “themed” housing and land development projects inspired by Mediterranean, Swiss, Italian, American, Caribbean and American Southern architecture and design. The Company believes that strict attention to detail in the execution of these themed communities helps to distinguish it from other companies, especially with respect to the high-end sector.

    Vista Land’s primary business is the development and sale of horizontal real estate projects, which comprise residential lots and units in the high-end, middle-income, low-cost and affordable housing segments. In addition, Vista Land develops and sells vertical residential projects, including low- to high-rise condominium developments.

  2. #1622
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    Far East Horizon

    Yield guidance at cost 4.5% area
    Expected Issue Size SGD Benchmark
    Denomination SGD 250k x 250k
    Timing As early as today
    Comments Okay for buy and hold

    Far East Horizon has strong and diversified shareholders. FEH is 27.94% own by Sinochem, 17% by KKR, 9% by Cathay life, 7.35% by GIC.

    Issue is rated BBB- by S&P

    Risk Rating 3N
    LV Indicative 70%

    Issuer: Far East Horizon Limited
    Issuer Ratings: BBB- stable (S&P)
    Exp Issue Ratings: BBB- (S&P)
    Format: Reg S / Sections 274 and 275 of SFA (Singapore) / Registered
    Status: Fixed Rate, Senior Unsecured Notes
    Tenor: 3.5 Year
    Size: S$ Benchmark
    Payment: Semi-annual, actual/365 (fixed)
    Details: SEHK Listing, S$250,000 Denoms, English Law
    Clearing Systems: Euroclear/Clearstream
    Joint Bookrunners and DBS Bank Ltd. and Standard Chartered Bank (B&D)
    Joint Lead Managers:
    Timing: As early as today

    Comps:
    Freshk 4.625 2017 USD - 4.27%, Z+ 335bp
    Vanke 3.275 2017 SGD - 3.36%, Sor + 210
    Eximbk 3.375 2017 SGD (BBB-) – 3.06%, sor + 185

    Profile:

    The Group is a leading financial services company specialising in providing customised financing solutions through equipment-based financial leasing, as well as providing extended value-added services to customers in targeted major industries in China.



    The Group currently operates its business in eight focused industries which it believes to have sustainable growth potential, including healthcare, education, infrastructure construction, electronic information, transportation, packaging, machinery and textile industries.

  3. #1623
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    Quote Originally Posted by DC33_2008 View Post
    Thanks. I have bought at 94.5 with coupon at 3.9% due 2017.
    the only 2017 CAPL Treasury bond is a 3.5%, size 250k, current price about 103-104. (you can use the ISIN to confirm)

  4. #1624
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    Thanks. Should I sell or hold? What is the downside?
    Quote Originally Posted by amk View Post
    the only 2017 CAPL Treasury bond is a 3.5%, size 250k, current price about 103-104. (you can use the ISIN to confirm)

  5. #1625
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    Quote Originally Posted by DC33_2008 View Post
    Thanks. Should I sell or hold? What is the downside?
    buy/sell bonds every time banks earns (50c?) from you for nothing. such short maturity, imho just hold it till end. same price anyway (yield at 2.#%).

  6. #1626
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    I found out that those very very smart bankers can easy earn big money through all the information they got from their own investment product team. I believe some very smart bankers may use all these info to get their friends or relatives (not sure wife can do it) to execute the trade outside.

    Almost every month, I will receive some "investment idea", structure note (ELN. FCN etc etc) from my banker. Some of ELN, FCN etc on that particular stock etc are very clear cut that the stock will drop. I have been collecting data on all the structure product (ELN, FCN etc) given to me by my banker since 2007. I find that those with very high coupon 25% to 40% or deep strike price 30% to 40% has a very very high chance it will drop a lot within weeks or mths.


    The recent structure note on HK Tencent . Coupon 30% per annual for six month period. Spot price launched at 52 weeks high @HK$634 early Mar2014. Seven week later, Price now is HK$483 almost 25% down.


    ---------------------------------------------------------------------------------
    The high net worth investors have been borrowing cheaply to leverage on bond , to buy >10 to 20 millions of universal life plan etc etc since early 2010 etc etc.

    Using S$5 million cash & leverage up to 20 million ONLY on investment grade bond holding can give U a yearly coupon on >$700k per year. Return of investment using S$5 million cash est >13%. 5 million in fixed deposit give U $50k/yr vs $700k/yr. That what the really smart & high net worth investors have been doing since 2010.


    So the very rich (high net worth) become richer through smart investing. The middle income earner feel that they are becoming poorer day be day. The majorities of the ave income earner become poor due to high inflation. The poorer income earner just need government help.

  7. #1627
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    China's richest man (currently), 王健林, is a self-made billionaire. He owns Wanda properties . I am thinking of buying WANDA PROPERTIES OVERSEA USD Bond 4.875% at below par around 97.5. Yield to maturity 5.4%.
    Top five holding in one of the unit trust bond fund. Need to keep till maturity.


    WANDA PROPERTIES OVERSEA USD Bond 4.875
    Mature in 21/11/2018
    investment grade BBB-
    LTV 70%.
    Min US$200k.
    Cash required US$60k.
    return of investment with leverage >13%.

    Sold one of my junk bond Kasie group Chinese developer 8.875% USD bond @ below par. Capital loss of 4%+. But gain 9%+ coupon. Nett gain 4%+ after holding > 1 year. I sell it off to switch more to investment grade bond.
    Still on target to meet my 2014 goal.

  8. #1628
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    Just to give you more investment grade bond data on which the very high net worth investors invested in. Small Investor like us wont get allocated due to our limited $$$ amount.


    STANDARD CHARTERED BANK HK
    Currency USD
    Coupon 5.875%
    Matured in Jun 2020.
    Investment grade
    LTV 80%
    Price is above par @ offer price 111
    Offer yield est 3.8%.

    Buy US$10 million of standard chart bank HK USD bond

    LTV 80%

    Your Cash required = US$2 millon (20%X10 million)

    Your Borrowed amt = US$(80%X10 million) = US$8 million

    Bond Coupon Yield = 5.875%

    Coupon $$$ = 5.875% X US$10 million = US$587,500 yearly

    Your loan interest = (1% X $8 millon) X or US$80,000 (interest paid/year)

    Safekeeping Fee = 0.2% or S$20,000 per year

    Net cash = US$(587,500 - 80,000-20,000) = US$487,500/year

    Return of investment % = (US$ 487,500/$2,000,000)
    = 24% with leveraging

    They just to need hold for 4 years to collect almost US$1,95,000 coupon . Their only risk is standard bank HK default payment. It is very liquid & they can sell anytime. I think the low interest rate may stay for a few more years. Even it goes up, it will slow & steady & the very high net worth investors will have sufficient time to make a decision to sell at anytime.

  9. #1629
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    how many % return are u looking for in 2014 again?

    Quote Originally Posted by cbsh38584 View Post
    China's richest man (currently), 王健林, is a self-made billionaire. He owns Wanda properties . I am thinking of buying WANDA PROPERTIES OVERSEA USD Bond 4.875% at below par around 97.5. Yield to maturity 5.4%.
    Top five holding in one of the unit trust bond fund. Need to keep till maturity.


    WANDA PROPERTIES OVERSEA USD Bond 4.875
    Mature in 21/11/2018
    investment grade BBB-
    LTV 70%.
    Min US$200k.
    Cash required US$60k.
    return of investment with leverage >13%.

    Sold one of my junk bond Kasie group Chinese developer 8.875% USD bond @ below par. Capital loss of 4%+. But gain 9%+ coupon. Nett gain 4%+ after holding > 1 year. I sell it off to switch more to investment grade bond.
    Still on target to meet my 2014 goal.

  10. #1630
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    Quote Originally Posted by bargain hunter View Post
    how many % return are u looking for in 2014 again?
    S$190k (13% +) net base on S$3m bond holding for 2014. Borrow >est S$1.5m. Jan to End Apr14 profit est S$80k. By 2016, will look into property.


    capital commercial trust 2% sold
    Capland 2.87% sold
    Genting Perp 5.25% Sold
    Ascendas Pte Ltd 4.75% sold
    Hutichson whampo 6% sold
    Cheung Kong infra 6.625% sold
    Noble group 8.5% sold
    Petra food sold
    ABN 4.7% Sold
    OUE 4.95% Sold
    Shui On 8% sold
    Banyan tree 6.25%
    Lippomall 5.875%
    Amtek 6.9%
    Trafugura 7.5%
    China central real estate 10.75%
    Hyflux 5.75%
    Olam perp 7%
    Far east Horizon 4.25%
    etc etc etc

  11. #1631
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    can u take ur 3m and borrow 7m and buy the stanchart hk bond? what's the denomination of that bond?

    Quote Originally Posted by cbsh38584 View Post
    S$190k (13% +) net base on S$3m bond holding for 2014. Borrow >est S$1.5m. Jan to End Apr14 profit est S$80k. By 2016, will look into property.


    capital commercial trust 2% sold
    Capland 2.87% sold
    Genting Perp 5.25% Sold
    Ascendas Pte Ltd 4.75% sold
    Hutichson whampo 6% sold
    Cheung Kong infra 6.625% sold
    Noble group 8.5% sold
    Petra food sold
    ABN 4.7% Sold
    OUE 4.95% Sold
    Shui On 8% sold
    Banyan tree 6.25%
    Lippomall 5.875%
    Amtek 6.9%
    Trafugura 7.5%
    China central real estate 10.75%
    Hyflux 5.75%
    Olam perp 7%
    Far east Horizon 4.25%
    etc etc etc

  12. #1632
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    Quote Originally Posted by bargain hunter View Post
    can u take ur 3m and borrow 7m and buy the stanchart hk bond? what's the denomination of that bond?
    The bond is in USD currency. The price is now way above par(Par 100) @price 111. Yield to maturity is only 3% plus. Only the big fund house and the very high net worth investors will be able to allocate the bond.

    I remember in 2006, I did apply for China construction bank IPO @ HK$5m. FYI, I don't have that much money at that time as I just open an acct in this bank. They just ask me to apply HK$5m. I got zero. The high net worth investor was given the share (don't need to apply). Easy > 20% profit


    The bank has a formula to calculate how much they can give your more collateral. It is base on your holding like SPH/Singpost , low/high risk bond , China stock , SG penny stock , cash , unit trust etc.

    I already borrowed >US$1.2m. No way I can borrow another $7m. The most is US$500k. But I will not use it as there is still a possibilities of margin call if a crisis causes my non investment grade bonds to fall >30%.




    U can apply during the IPO but I doubt U will get it as most of the very high net worth or big bond fund mgr will be allocated as 1st priority.

  13. #1633
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    But the bank allow me to apply new IPO bond up to US$2m to US$5 million even though I have borrowed US$1.2m.

    My banker advise me to apply the new IPO SGD bond Far east horizon SGD$2m. I told him what if I am allocate the full amt SGD$2m which I do not have the money. His says that the chances is zero as the new IPO bond is in demand. If it really got S$2m allocation, his advise is to sell in the open market when it start trading. I apply for S$1m & got S$250k ( 1lot) of far east horizon 4.25%. Now sell price est 100.5.

    Many very high net worth are using the "corrupted" system in the banking industry to leverage up & make more money especially through bond.

  14. #1634
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    Quote Originally Posted by cbsh38584 View Post
    But the bank allow me to apply new IPO bond up to US$2m to US$5 million even though I have borrowed US$1.2m.

    My banker advise me to apply the new IPO SGD bond Far east horizon SGD$2m. I told him what if I am allocate the full amt SGD$2m which I do not have the money. His says that the chances is zero as the new IPO bond is in demand. If it really got S$2m allocation, his advise is to sell in the open market when it start trading. I apply for S$1m & got S$250k ( 1lot) of far east horizon 4.25%. Now sell price est 100.5.

    Many very high net worth are using the "corrupted" system in the banking industry to leverage up & make more money especially through bond.
    I applied 2m for Yanlord, got zero. At 2.5m allocation 1 lot. Hahahaha

    Missed by 0.5m.

    Bot in secondary market.

  15. #1635
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    Quote Originally Posted by chestnut View Post
    I applied 2m for Yanlord, got zero. At 2.5m allocation 1 lot. Hahahaha

    Missed by 0.5m.

    Bot in secondary market.
    I have enough of Chinese developer & mining related bond. Slowly move more to investment grade bond.

    Just take note that Yanlord USD bond did drop >35% during the Euro crisis in 2011.But now it is above par @ 105. Evergrande Chinese developer drops from 98 to 55. It survived & matured in Jan 2014. Must mentally be prepared for the drop of >30% if another Euro or China crisis happen again. It could be China crisis in 2015 or 2016 or 2017. Nobody knows.

  16. #1636
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    i think the very very basic 70% max rule applies to everyone. whatever u pledge, at most they lend u 70% of that value, so 3m they max lend u 2.1m. those richies who borrowed 7m, prob pledged 10m in other liquid assets.

  17. #1637
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    I no bullets Liao. Can only watch from the sideline... Good luck to all e folks here

  18. #1638
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    The StanChart bond calculation is not correct. The offer is not at par, so the yield only 3.5, after leverage with risk you get yield * yr leverage ratio.

    Not true always 70%. Some Swiss bank can value your total asset including pty and loan you anything you want. Even the "mortgage" is not a mortgage. It is a one month term loan rolled every month, so technically not under MAS regulation. The real tough part is negotiate which bond they can give you leverage. Some compliance demands it must be rated above a certain level, some is totally depending on yr relationship. Banks earn very healthy margin doing bond trading and lending, they are more than happy to loan you.

    Mongolian Mining anyone ? already very high yield, now deeply below par some more.

  19. #1639
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    Issuer Standard Chartered Bank [Hongkong] Ltd.
    Bond Type Corporate USA and World
    Issue Volume 750,000,000
    Currency USD
    Issue Price 99.49
    Issue Date 6/24/2010
    Coupon 5.875%
    Maturity Date 6/24/2020
    Coupon Start Date 12/24/2010
    Final Coupon Date 6/23/2020

    At the current price of 111.67% this equals a annual yield of 3.98%

    I wanted to buy this bond last year. But the price is simply too high @108/109 last year.

  20. #1640
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    Big Banks & Derivatives: Why Another Financial Crisis Is Inevitable

    2013 article from forbes
    Financial reform didn’t work. Banks today are bigger and more opaque than ever, and they continue to trade in derivatives in many of the same ways they did before the crash, but on a larger scale and with precisely the same unknown risks.

    Ignoring warning signs has inevitable consequences. We ignored them before and we saw what happened. We can say this with virtual certainty: if we continue as now and ignore them again, the great white shark of a global financial meltdown will gobble up the meager economic recovery and make 2008 look like a hiccup.

    We can’t say when this will happen. We can’t say which bank or which particular instrument will trigger the debacle. What we can say with virtual certainty is that if we continue as now is that it will happen. Because the scale of the trading is larger, and because the depleted government treasures are not well placed for another huge bailout, the impact will be worse than 2008.

    --------------------------------------------------------------------------------
    Just be very extra careful to do your own financial housekeeping every quarterly or half yearly. Make sure don't over leverage way to the extreme. Some of your investment portfolio must not be illiquid. Easy to dispose.

    Illiquid small issue size bond
    Private equity investment
    Non investment grade corporate Bond (Junk bond) especially emerging mkt
    Hegde fund that can sell only every quarterly or yearly.
    etc etc


    Just in case another similar Financial crisis prediction really come true and come much early.

  21. #1641
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    i think i'm very conservative. i think i won't want to borrow beyond 70% anyway.

    Quote Originally Posted by amk View Post
    The StanChart bond calculation is not correct. The offer is not at par, so the yield only 3.5, after leverage with risk you get yield * yr leverage ratio.

    Not true always 70%. Some Swiss bank can value your total asset including pty and loan you anything you want. Even the "mortgage" is not a mortgage. It is a one month term loan rolled every month, so technically not under MAS regulation. The real tough part is negotiate which bond they can give you leverage. Some compliance demands it must be rated above a certain level, some is totally depending on yr relationship. Banks earn very healthy margin doing bond trading and lending, they are more than happy to loan you.

    Mongolian Mining anyone ? already very high yield, now deeply below par some more.

  22. #1642
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    Quote Originally Posted by cbsh38584 View Post
    Big Banks & Derivatives: Why Another Financial Crisis Is Inevitable

    2013 article from forbes
    Financial reform didn’t work. Banks today are bigger and more opaque than ever, and they continue to trade in derivatives in many of the same ways they did before the crash, but on a larger scale and with precisely the same unknown risks.

    Ignoring warning signs has inevitable consequences. We ignored them before and we saw what happened. We can say this with virtual certainty: if we continue as now and ignore them again, the great white shark of a global financial meltdown will gobble up the meager economic recovery and make 2008 look like a hiccup.

    We can’t say when this will happen. We can’t say which bank or which particular instrument will trigger the debacle. What we can say with virtual certainty is that if we continue as now is that it will happen. Because the scale of the trading is larger, and because the depleted government treasures are not well placed for another huge bailout, the impact will be worse than 2008.

    --------------------------------------------------------------------------------
    Just be very extra careful to do your own financial housekeeping every quarterly or half yearly. Make sure don't over leverage way to the extreme. Some of your investment portfolio must not be illiquid. Easy to dispose.

    Illiquid small issue size bond
    Private equity investment
    Non investment grade corporate Bond (Junk bond) especially emerging mkt
    Hegde fund that can sell only every quarterly or yearly.
    etc etc


    Just in case another similar Financial crisis prediction really come true and come much early.

    FYI, I am highlighting this is to remind myself not to be complacent. We human being has a short term memory. I believe most of them has forgotten the 2008/09 crisis. Back to buying high risk product , more leveraging , Use more CFD etc.

    Those who do not remember their past crisis are condemned to repeat their mistakes


    Just be very extra careful to do your own financial housekeeping every quarterly or half yearly. Make sure don't over leverage way to the extreme. Some of your investment portfolio must not be illiquid. Easy to dispose.

    *Illiquid small issue size bond
    *Perp bond
    *6 mths period ELN or 12 mths FCN
    *Accumulator
    *Private equity investment
    *Non investment grade corporate Bond (Junk bond) especially emerging mkt
    *Hegde fund that can sell only every quarterly or yearly


    etc etc

  23. #1643
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    Default USD

    Overnight with the Ukranium crisis surfacing again, can anyone explain why USD come down last night, while EUR and JPY moves up ?

    I thought in a crisis, USD should be a safe haven bid in high demand ?

    If the Ukranium crisis does trigger war, will you sell your corporate bonds ?

  24. #1644
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    Two issues for today:
    Gallant 3Yr 6.125 Guidance
    Rickmers Trust Management 3Yr 8.50% Guidance

    Applied for Rickmers and will hear about allocation status tomorrow.



    Quote Originally Posted by NTG View Post
    Overnight with the Ukranium crisis surfacing again, can anyone explain why USD come down last night, while EUR and JPY moves up ?

    I thought in a crisis, USD should be a safe haven bid in high demand ?

    If the Ukranium crisis does trigger war, will you sell your corporate bonds ?
    NTG: Investment is similar to Religion, in the aspect of conviction, both in execution and analysis cannot easily be taught nor instilled into another party. It is developed from within. Some are better developed over time, some would like to think they are developed.

    So lets speak broadly about probably more widely accepted fact, currencies as an instrument class are biased heavily on technical analysis. Stocks apply more fundamental valuation aspects, Bonds probably heavier with fundamental modelling, and options IMHO is almost all strategy and/or modelling.

    Some take demand/supply theory too seriously, as such, they understand too little about price action, which I reckon matters more. Some believe he news too much, try having 2000 pieces of news flash per day to help you make a decision? Analysis paralysis comes about.

    Normally true, but not always, USD strengthens when there is crisis, or when situations like Dow tanking hard. Correlation is not, was not, and never will be perfect 1.00. Explanations are almost always out there in the news, sometimes in rarer circumstances, they may not be able to "explain" their way out. Many get stuck in this loop of seeking explanations, if you do as well, start questioning the news, and/or whether you are taking them too seriously in building your own convictions. I can only try to let you understand how conviction is important here, but I cannot convince you with my explanations for the events because only you should be doing that, hence I am not trying but instead attempting to let you understand why, which I think is for the better.

    As far as a war is concerned, I think the probability is as good as rising interest rates in the future. How else is the world going to get out of this financial mess? Only wars has been the true way, in unfortunate sense albeit, to get real production going. Every major bear market bottom is marked by war, and post-war economic recovery is almost as real as it can get, so without wanting to sound like a cynic or fear monger, it is the inevitable. Can't tell for sure right now whether it would be feasible or possible to liquidate the corporate bonds, but there would probably be war bonds if the war becomes serious. In a different note, I would exit my USD's for Gold in the coming months of the year. Last time I felt strongly for them, and in physical form, was back in 2008 when it was USD700-750, unfortunately it wasn't popular enough to source for them back then, so it was a missed boat, but nonetheless would have been a positive outcome, this time, its the same feeling almost all over but with better infrastructure to support physical gold positions in SG.

  25. #1645
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    Thanks Banana55.

    As FED tapering is expected to complete this year, and Ukraine crisis should have impact on EURO (geographical proximity and energy dependency on Russia (oil prices) , it come to a bit of surprise when we started accumulating traditional safe haven currency and liquid asset starting this year.
    Last edited by NTG; 06-05-14 at 11:12.

  26. #1646
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    Gallant 3Yr 6.125 Guidance, Final 5.9% (note prev 2Y Coupon was 5.95%)
    Rickmers Trust Management 3Yr 8.50% Guidance, Final 8.45%

    Was allocated 2 units of Rickmers, first trading day today hearing 99.50 bid. It had 75 cents rebate, and for Gallant I heard rebate was 50 cents. Gallant 3Y trades 100.25 bid according to tradehaven.

  27. #1647
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    Quote Originally Posted by banana55 View Post
    Gallant 3Yr 6.125 Guidance, Final 5.9% (note prev 2Y Coupon was 5.95%)
    Rickmers Trust Management 3Yr 8.50% Guidance, Final 8.45%

    Was allocated 2 units of Rickmers, first trading day today hearing 99.50 bid. It had 75 cents rebate, and for Gallant I heard rebate was 50 cents. Gallant 3Y trades 100.25 bid according to tradehaven.
    Junk bond - High yield high risk. If the next similar Lehman crisis come (don't know when . 2017?), all the junk bond will drop 40% to 50%. We just need to be well prepared for it. Must know when to sell. If it is a illiquid junk bond, it will be even worst. Price may drop > 50%. The extreme worst case is the company default on the coupon.

    Gallant has survived the Sar 2003 & Lehman crisis in 2008, hopefull they are well prepared to survive the next crisis.

    I normally chose those junk/investment grade bond that a few of the unit trust bond fund top 5-10 holdings . One of the example is China country garden 11.25% due Apr 2017. Price @106. Waiting for correction.

  28. #1648
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    Quote Originally Posted by cbsh38584 View Post
    Junk bond - High yield high risk. If the next similar Lehman crisis come (don't know when . 2017?), all the junk bond will drop 40% to 50%. We just need to be well prepared for it. Must know when to sell. If it is a illiquid junk bond, it will be even worst. Price may drop > 50%. The extreme worst case is the company default on the coupon.

    Gallant has survived the Sar 2003 & Lehman crisis in 2008, hopefull they are well prepared to survive the next crisis.

    I normally chose those junk/investment grade bond that a few of the unit trust bond fund top 5-10 holdings . One of the example is China country garden 11.25% due Apr 2017. Price @106. Waiting for correction.
    The two common theme in recent times I observe for increasing income are:
    1. leverage up on corp investment grade bonds.
    2. Buy junk bonds for high yield but typically without leverage

    We exclude unleveraged investment grade(low or negative total return) and leveraging on junk (no need sympathy for these category).

    When it comes to a systemic fire sale, everything sells, but to various magnitudes. Say investment grade corps takes a 10% hit, and junks a 50% hit. Scenario 1 assuming 4x gearing, and junks without gearing puts the game back at about even between what I think are the 2 most common strategies without factoring issuer selection. Default risk is more associated with issuer selection in most respect.

    I see your point there with liquidity, especially when issues are backed by bond fund's exposure, but besides the obvious investment grading behind these, a discount is implied into yields. Likewise, an implied premium should be present to compensate for an illiquid junk, hence a natural yield differential between them. The discipline of managing use of leverage especially in these times of easy credit is possibly the most single considerable part in managing a portfolio.

  29. #1649
    Join Date
    Jan 2011
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    1,081

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    Quote Originally Posted by banana55 View Post
    The two common theme in recent times I observe for increasing income are:
    1. leverage up on corp investment grade bonds.
    2. Buy junk bonds for high yield but typically without leverage

    We exclude unleveraged investment grade(low or negative total return) and leveraging on junk (no need sympathy for these category).

    When it comes to a systemic fire sale, everything sells, but to various magnitudes. Say investment grade corps takes a 10% hit, and junks a 50% hit. Scenario 1 assuming 4x gearing, and junks without gearing puts the game back at about even between what I think are the 2 most common strategies without factoring issuer selection. Default risk is more associated with issuer selection in most respect.

    I see your point there with liquidity, especially when issues are backed by bond fund's exposure, but besides the obvious investment grading behind these, a discount is implied into yields. Likewise, an implied premium should be present to compensate for an illiquid junk, hence a natural yield differential between them. The discipline of managing use of leverage especially in these times of easy credit is possibly the most single considerable part in managing a portfolio.

    There are some Junk corporate bond investors (90%) are mostly retail clients. These are the junk bond I will probably not buying.

    I do leverage on Junk bond. So I prefer junk bond with institutional house like Temasek , GIC , insurance companies & large bond unit trust fund house as a major investors. The default risk is much lower.

    I bought Chinese developer Evergrande CNY 7.5% bond (due Jan14) in 2011. Evergrande is one of the top five property developer in China. It is listed in HK X-change. So I find that the chances of default is quite low. But I have to ride through the mental emotional torturing during the Euro crisis in 2011 (Price dropped to 55) & the muddy water Attack (accounting fault) in Jul 2012 (price drop 75). I sold in 2013 @101+. Matured in Jan 2014.

  30. #1650
    Join Date
    Apr 2011
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    2,810

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    What do you all think of Allianz US High Yield? I was told that dividend is around 7%.

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