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Thread: BOND THREAD

  1. #2601
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    Quote Originally Posted by Laguna View Post
    for me
    1. Avoid all bonds marketed by DBS
    2. Even UBS did not sell me this floater.
    lolx
    Do not buy anything from any financial institution in Singapore. I did so and have lost a lot of money. I have never made one penny investing in stocks or bonds, or mutual funds. Real estate is how I made a bit of money.

  2. #2602
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    I got offered this one too... basically suggested to me to put up USD150k in cash and borrow USD840k

    Quote Originally Posted by cbsh38584 View Post
    DBS is launching UBS Asian Bond Series 2 – Floating Rate Class.
    Quarterly payouts 3m libor + ( around 1.3 to 1.45%) all in indicative est ( 3.63 to 3.78%)
    Very Special loan spread 0.25 % +3m libor
    LTV 85%
    Tenor - 4.3 years
    Risk level 3 (highest is 5)

    Let say u invested 500k & borrow 500k.
    Yearly nett coupon after minus borrowing cost est - 1.1% x 500k = US$5.5k/yr without any $ cash layout.


    The fund collected will invest into Asian investment grade & junk bond (around 70 of the bond) which has dropped quite a lot. So no concentration risk on single bond. Name like Evergrande , state bank of india , korea national oil , pertmina Persero , Guangzhou R&F etc are some of the name they will buy.

    The investments are not guaranteed in capital and the loss is limited to amount invested. Clients are exposed to the risk of default of the underlying issuers and leverage may magnify any potential loss.


    I bought a similar fund at CS two years ago. I told profit less than a year without any early redemption penalty.
    DBS is quite aggressive in pushing this fund but I am not interested. Any "carrot" or "incentive" to lure clients
    to buy is something I will not be interested.

  3. #2603
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    Since there is a early redemption penalty of 1% in the 1st 3 year. It make it even not attractive.

    The recent (2 days ago) issued PUB bond 3.01% 15 yrs (due 2033) tenor an alternative to fixed deposit
    for those very low risk taker.

    PUB bond 3.620% due 12th Oct2027 (SGD) is trading above par (107).

  4. #2604
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    https://www.theedgesingapore.com/sin...3ca48-90699429

    Reflects my own sentiments as well. Definitely seeing a flight to quality

  5. #2605
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  6. #2606
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    For those holding CES bonds, the money comes back today if you put your bonds!

    Talk in the mkt that UOL may be issuing new bond soon.

  7. #2607
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    Quote Originally Posted by starrynight View Post
    For those holding CES bonds, the money comes back today if you put your bonds!

    Talk in the mkt that UOL may be issuing new bond soon.

    I bought CES one lot at 98 just a few mths ago. I cancel another one lot due to miss communication on my banker side.
    The bank sold & absorbed the 2k+ loss.

    Bought 500k of PIL due Nov 2018 at 100.2 early last yr. Thinking of switching to PIL 8.5% due on Nov 20. But no seller at the moment. Pacific intl line.

  8. #2608
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    A bond is a debt security and is a form of borrowing. Governments and companies issue bonds to raise funds from investors willing to lend them money for a period of time. Investors, including retail investors, buy bonds to earn interest during the life of the bond. Bonds can form part of investors’ investment portfolios.

    Risk of investing in Bonds
    * Credit Risk * Interest rate risk * Liquidity risk * FX risk
    Credit risk is an investor's risk of loss arising from a borrower who does not make payments as promised
    Moody investment grade rating
    Aaa , Aa1 , Aa2 , Aa3 , A1 , A2 , A3 , Baa1 , Baa2 , Baa3
    Moddy Non-investment grade
    Ba1 Ba2 Na3 B1 B2 B3 Caa1 Caa2 Caa3 D
     
    S&P and Fitch investment grade rating
    AAA AA+ AA AA- A+ A- BBB+ BBB BBB-
    S&P and Fitch Non investment grading Rating
    BB+ BB BB- B+ B B- CCC+ CCC CCC- D
     
    Interest rate risk affects the value of bonds more directly than stocks, and it is a major risk to all bondholders. As interest rates rise, bond prices fall and vice versa. The rationale is that as interest rates increase, the opportunity cost of holding a bond decreases since investors are able to realize greater yields by switching to other investments that reflect the higher interest rate. For example, a 5% bond is worth more if interest rates decrease since the bondholder receives a fixed rate of return relative to the market, which is offering a lower rate of return as a result of the decrease in rates
    Liquidity Risk
    In an Liquid market, investors run the risk of either having to retain the bond till maturity or selling it before maturity at an unfavorable price
    Issue size = liquidity ? (>US$500m more liquid ?)
    Establishing a fair price & price comaprisons can be difficult or impossible as there are sometimes no Counterparties interested in the bond.

    FX risk
    Morgan Stanley 7.625% Aust dollar bond Due 2016
    Aud/SGD 1.33 (1st Feb12)
    Aud SGD 1.254(1st Jun12)
    Aud/SGD 1.285(12th Dec12)
    If U borrow (due to low rate 1.55%) SGD or USD to convert to Aust to buy Aust bond. There is a FX risk which may go against you

    Bond Types
    Fixed Rate bond (straight bond)
    Fixed maturity & fixed cash flow pattern (I.ecoupon)
    Eg NOL 4.25% due 2017
    Olam 4.07% due Feb 2013

    Callable bond
    Gives the issues the right to buy back all or some of the issues prior to maturity
    Call price : Specified price at which the bond may be repaid
    Eg Hyflux 4.25% 2018. (Callable on 7 Sep15 @ 102.13)

    Perpertual bond (some do come with callable term)
    Bond in which the issuer does not repay the principal. Rather, a perpetual bond pays the bondholder a fixed coupon as long as he/she holds it. Prices for perpetual bonds vary widely according to long-term interest rates. When interest rates rise, perpetual bonds fall and vice versa.
     
     
    Inflating-linked bond
    Pays a fixed coupon + an amt that is linked to a price index to compensate for inflation
    * S’pore’s central bank is studying the feasibility of selling
    Inflation-linked bonds to help citizens boost on savings amid low interest rate ( Bloomberg 9th Jul 2012)

    Convertible bond
    * Hybrid that combines both equity & debt features
    * Holders have the right to convert the bond into issers’s equity in a predominated ratio during a specified conversion period
    Eg Keppel land 1.875% due 2015 convertible bond
    Conversion price @ $6.72. ( Now trading @3.8)

     
    Bond structure
    Unsecured Bond that is not secured by a collateral.Most bond are unsecured
    Secured Bond.
    Bond is backed by a Collateral
    Eg OUE 3.36% due 2013.
    Back by Mandarin gallery & Mandarine Orchard.
     
     
    Bond seniority
    bondholders are credits & therefore have a higher priority calim than equity holders in a liqudation or restructuring scenario.
    Senior bond has a higher priority claim than other bonds on the assets issued by the same entity.

    Subordinated (junior) bond A class of bond that, in the event of liquidation, is prioritized lower than other classes of bonds. For example, a subordinate bond may be an unsecured bond, which has no collateral. Should the issuer be liquidated, all secured bonds and similar debts must be repaid before the subordinated bond is repaid. A subordinate bond carries higher risk, but also pays higher returns than other classes



    NikkoAM SGD ETF retail bond. [email protected]$1. Est coupon 3.2% to 3.3%.

    Top holding. LTA , HDB , PUB etc.

    Low risk. Use SRS acct to buy & keep for long term.

  9. #2609
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    Thanks Vic
    very good summary.

  10. #2610
    Junior

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    There are now many many indicators pointing to the same direction of market likely to be in the near future.

    Expect many companies to miss their estimates and trim their forecasts in this coming quarter.

    Just be extremely cautious in your investment. At time, zero holding is better than invested.

  11. #2611
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    Default Re: BOND THREAD

    Over the last 9 years ( started 2010 ) , I hv built up a bond portfolio that comprise investment-grade bonds (20%) and high yield junk bond (80%) with leveraging.It generates annual income of ave $180k after deducting borrowing cost of 0.9% to 1.5% (from 2011 to 2017) . My bond portfolio was as high > $4 million (with leveraging) during good times (borrowing cost 0.9% to 1.5%) .But in 2018, my annual income around $110k as I take less risk (less junk bond) & less leverage. Zero leverage for 2019 as I want more peaceful night . So far I have traded in/out more than 100 corporate bond (2010 to 2019). Buy during IPO (@100) & sell at profit above par within 0.5 to 1.5 yrs. I only hold a few bond till maturity.


    Despite being hit by bond default, I still manage to do reasonable well. Now I am more cautious as another default will make my bond investment underperforming. If I will to go out to buy millions of stock with high leveraging like in 2006/07. I will be very very emotional unstable & chances of losing money is high. So I switch to bond trading.


    1) Low borrowing cost (0.9% to 1.5% from 2010 to 2016)
    2) Less volatile so emotionally it will affect me less.
    3) Capital gain is fast due to US QE (2010 to 2016). Buy at IPO 100 & sell at 103 to 1.10 plus accrue interest in 1-2 yrs.
    4) Corporate Bond has a higher LTV than stock.


    I do have sleepless night buying junk bond like China Evergrande /Olam which was attacked by buddy water. Luckily, I ride through the crisis. During the oil crisis (2015) which I bought India Vedanta US$400k. It dropped as low as 70. I regretted buying huge amt US$400k just into one counter. I was very stressful. I asked my brother in law's friend (former fund mgr) about this India oil company.He said unlikely this company will default. I ride through it & get called . As for bond default, many many sleepless night. But month later, I learnt to accept it & move on.


    I have survived the 1997 Asia financial crisis & Lehman 2008/09 Crisis. I was lucky as I was saved by Mahathir (97) & Dr Tony Tan (Mar08). I may not be 3rd time lucky like in 1997 & 2008 given advance warning from Dr Tony Tan. Many great Guru said that the crisis bigger than Lehman is coming. From 2012 till the recent 2019. It look like it is going to come . A big drop in dow jones in early 2019. But it recover fast & furious. It seem that the biggest fat Wolf never comes at all. Right now, Many investors maybe are complacent now. Record bond issuing since 2018/19 especially from China. 10% ,12% 15% etc. Damn worrying. Even our LTA , HDB , PUB , KEPcorp , SIA etc issue more bond.


    Warren Buffett is noticing a unique phenomenon right now in the global economy: negative interest rates and low inflation. So something different is happening, but something different happens all the time,” he said.


    Right now, I am reducing my risk for my family sake as I really do not know when the biggest fat wolf is coming. My income for bond is only 70k to 80k for 2019 from high of 280k in 2012/2013. I may want to look for alternative in 2020 as may want to keep more cash on hand. I am lucky that I started contribute to max the CPF annual limit early(now 37.7k per year). Tgt to hit high $1.5m at age 65 *(hello Pension Goodbye Tension) . Still a long way.

    By other investment
    =============
    Property - Make very good $

    Private equity fund(from 2006 to 2019) - Make good $. Profit est $300k.Nearly lose $ as I want to sell in 2009.It does not allow me sell at NAV. Sell at zero to them. Force to keep.

    Unit trust - Make some $ as did not invest in big amount and also did not hold for long term (10 to 15 yrs ) like a private equity fund.

    FX - Waste of time .Make some $ despite do hundred of times trade. Opportunities comes,then do. Recent trade sell SGD buy Aud @0.948. Premium only $550 ( 1mth).

    Stock - Trade in/out a few hundred time (maybe a thousand time). A totally waste of time & money. Lose money but not a lot. Just buy bank stock & hold should be the right strategy. Timing is important.

  12. #2612
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    Default Re: BOND THREAD

    Quote Originally Posted by cbsh38584 View Post
    I have survived the 1997 Asia financial crisis & Lehman 2008/09 Crisis. I was lucky as I was saved by Mahathir (97) & Dr Tony Tan (Mar08). I may not be 3rd time lucky like in 1997 & 2008 given advance warning from Dr Tony Tan. Many great Guru said that the crisis bigger than Lehman is coming. From 2012 till the recent 2019. It look like it is going to come . A big drop in dow jones in early 2019. But it recover fast & furious. It seem that the biggest fat Wolf never comes at all. Right now, Many investors maybe are complacent now. Record bond issuing since 2018/19 especially from China. 10% ,12% 15% etc. Damn worrying. Even our LTA , HDB , PUB , KEPcorp , SIA etc issue more bond.
    1997 AFC - IMF, World Bank tell the yellow people they need to sell their asset, privatize their national company.

    2008 GFC - Ben tell the whole World don't worry print money and buy all the rubbish and keep in the Bank. When the World cannot print as fast as the US they borrow from someone who can print more. Singapore already learns the art of money printing and one of the art is Bond. I print a piece of paper call Bond and people use another piece of paper called Money.

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