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Thread: BOND THREAD

  1. #1501
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    If I were nearer retirement and was looking for diversified and longer tenor fixed income, this would have been of interest.

    Quote Originally Posted by amk View Post
    this is the one I asked vic abt. Already closed 2 days ago. small size finished in one day.

  2. #1502
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    TRAFIGURA SGD PERP bond priced at a fixed rate of 7.5 is very attractive to me.

    As I do not want to increase my bond holding. So I decide to sell away hyflux 5.75% Perp bond @ 100.25 & switch out to a higher coupon TRAFIGURA SGD 7.5% PERP bond (issued 2 weeks ago) @100.05.


    TRAFIGURA USD PERP bond priced at a fixed rate of 7.625%, was met with very strong interest last year, Apr 2013. Price to buy is @102 now for USD perp bond. So I think the TRAFIGURA SGD perp may have some room to go up beyond 100. Do not intend to hold long term. Once my tgt is met, I will sell it .

    USD interest loan rate came down a bit from 1.05% to 0.998%. SGD interest loan rate is @ 1.06%.


    Also apply S$20k for the retail capitalmall trust bond 3.08%. Only got S$11k. Price to sell from SGX screen is $1.008. No custodian fee for retail bond.


    rdgs,
    Vic

  3. #1503
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    this is my favorite thread.
    thanks vic for the constant updating.

  4. #1504
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    after capital mall trust bond 3.08%, may i know what's the next?

  5. #1505
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    Quote Originally Posted by cbsh38584 View Post
    When I bought Chinese developer Evergrande RMB 7.5% bond (dueJan14) in Jan11 , the x-rate was USD/CNH 6.53 or SGD/CNH 5.05. Today Jan14, USD/CNH is 6.06. Almost 7% currency appreciation since Jan11. For SGD/CNH 4.75 , it is est 6% appreciation.

    I am not sure whether the RMB will be strengthen again next 2-3 yrs. It could stabilise or could weaken . This is the unknown currency risk now.


    I prefer Aust bond if it currency weakness further weaken to Aus/USD 0.8 to 0.85. Get your banker to list down investment grade Aust bond to seek a better opportunities if it comes.

    The min amt to buy Aust bond is Aus$50k. You require min US$200k for USD bond & min Rmb$1m for RMB bond. Amt too big for both USD/RMB bond.


    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)
    Aud/SGD 1.12 (Jan14)


    rdgs,
    Vic

    Chinese RMB weaken by 0.8% (6.06+ to 6.126) since last week. So when we want to buy RMB bond, we need to take note of it. Some analyst say this is just a temporary dip. It may strengthen to below 6 by end of 2014.

    rdgs,
    Vic

  6. #1506
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    Posting in next few posts some recent bond issuances:

    ISSUER: Chu Kong Petroleum and Natural Gas Steel Pipe Holdings Limited
    ISSUE: RMB-denominated Senior Unsecured Notes
    FORMAT: Regulation S Registered
    RATING: Unrated
    ISSUE SIZE: TBD
    TENOR: 3 years
    Initial Price Guidance: 11.5% area
    CHANGE OF CONTROL PUT: Noteholders put at 101% upon occurrence of a Change of Control
    FINANCIAL COVENANTS: Tangible net worth, gearing and interest cover
    financial covenants
    DENOMS: RMB1,000,000 x RMB10,000
    CLEARING: Euroclear / Clearstream
    LISTING: The Stock Exchange of Hong Kong Limited
    GOVERNING LAW: English Law
    USE OF PROCEEDS: Repay and/or refinance the existing indebtedness of the Group and for general corporate purposes
    SOLE BOOKRUNNER DBS Bank Ltd.
    AND LEAD MANAGER:
    TIMING: As early as today
    Risk Rating: 4N
    LV: TBC

  7. #1507
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    ISSUER Starhill Global REIT MTN Pte. Ltd.
    GUARANTOR HSBC Institutional Trust Services (Singapore) Limited (in its capacity as trustee of Starhill Global Real Estate Investment Trust)
    STATUS Direct, unconditional, unsubordinated and unsecured Notes
    EXPECTED ISSUE RATING BBB+ (S&P)
    ISSUE SIZE TBD
    DISTRIBUTION As per Information Memorandum dated 9 June 2010 (as supplemented by the Supplemental IM dated 17 February 2014), including the Singapore selling restrictions under Sections 274/275 of the Singapore Securities and Futures Act
    FORMAT/DOCS Bearer / Issuer’s SGD 2 billion Multicurrency Medium Term Note Programme
    TENOR 7-Year
    INTEREST PAYMENT Semi-annual, actual/365 (fixed)
    Price Guidance: 3.5% area
    DENOMINATION SGD250K
    GOVERNING LAW Singapore Law
    LISTING SGX-ST
    CLEARING CDP
    SELLING RESTRICTIONS Sections 274 and/or 275 of the Singapore SFA
    JOINT LEAD MANAGERS AND BOOKRUNNERS ANZ and OCBC Bank (B&D)
    TIMING As early as today’s business
    Risk Rating 4N
    LV Indicative 65%

  8. #1508
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    ISSUER: Wing Tai Holdings Limited
    FORMAT: S274 & 275 and Reg S Bearer, Fixed Rate Notes
    STRUCTURE: Fixed Rate Senior Unsecured Notes
    FORMAT: Regulation S, off the Issuer’s MTN programme
    RATING: Unrated
    ISSUE SIZE: TBD
    TENOR: 10 Years
    PAYMENT: Semi-annual, actual/365 (fixed)
    Price Guidance: 4.85% area
    DENOM: SGD250k
    DETAILS: Singapore Law/SGX-ST
    CLEARING: CDP
    SELLING RESTRICTIONS: As per IM, S274 & S275 of Singapore SFA SOLE LEAD MANAGER & BOOKRUNNER: DBS
    TIMING: As early as today's business
    Risk Rating: 4N

  9. #1509
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    Issuer: Indian Railway Finance Corporation Limited
    Issuer Rating: Baa3/BBB-/BBB- (Moody’s/S&P/Fitch)
    Expected Issue Rating: Baa3/BBB-/BBB- (Moody’s/S&P/Fitch)
    Status: Fixed Rate, Senior Unsecured
    Format: Reg S only, Registered
    Tenor: 5 YR
    Expected Size: US$ Benchmark
    Guidance: CT+265bps area (~4.1% area)
    Event of Default: If Government of India ceases to own, directly or indirectly, more than 51% of voting securities of IRFC
    Terms: SGX listing, US$200k/1k denoms, English law
    Joint Bookrunners: ANZ, Barclays, Deutsche Bank and The Royal Bank of Scotland
    Timing: Today's business
    Risk Rating: 3
    Indic LV: 70%

  10. #1510
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    ISSUER: NWD (MTN) Limited
    GUARANTOR: New World Development Company Limited
    ISSUER RATINGS: Unrated
    TYPE: Senior Unsecured Bonds
    FORMAT: Reg S Registered off MTN Programme
    ISSUER SIZE: US$ Benchmark
    TENOR: 7-Year
    Price Guidance: 7yr UST + 340bps à Indic 5.52%
    USE OF PROCEEDS: General Corporate Purposes
    DETAILS: HKSE listing, US$200k/1k Denoms, English Law
    JOINT GLOBAL COORDINATORS: HSBC (B&D), JP Morgan, UBS
    JOINT BOOKRUNNERS: HSBC, JP Morgan, UBS, CLSA (a CITIC Securities Co.)

  11. #1511
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    Issuer: Intesa Sanpaolo Bank Ireland P.L.C.
    Guarantor: Intesa Sanpaolo S.p.A.
    Expected Issue Ratings: Baa2 / BBB / BBB+ / AL (M/S&P/F/DBRS)
    Status: Senior Unsecured, Unsubordinated,Reg S Registered Notes
    Expected Size: CNH Benchmark
    Settlement: 27-Feb-14
    Maturity: 27-Feb-19
    Coupon: Fixed, semi-annual ACT/365
    PRICE GUIDANCE: 4.5% area
    Listing/Denoms: Luxembourg Stock Exchange / CNY1000k+10k
    Docs/Law: Issuer’s EMTN Programme / English
    Joint Leads: Banca IMI / HSBC (B&D) / SinoPac
    Timing: Today's business
    Risk Rating: 3N
    LV: Indic 70%

  12. #1512
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    Coupon rate not stated


    +++


    Issuer: China CITIC Bank Corporation Limited
    Issuer Ratings: Baa2 stable / BBB stable (Moody's/Fitch)
    Issue Ratings: Unrated
    Format: RegS Registered
    Ranking: Senior Unsecured
    Issue Size: CNH Benchmark
    Tenor: 3y
    Details: CNY1,000,000 x CNY10,000 denoms, SEHK, Hong Kong Law
    Clearing: CMU with linkage to Euroclear and Clearstream Joint Global Coordinators: HSBC, BBVA
    Joint Bookrunners: HSBC, BBVA, CITIC Securities Intl
    Joint Lead Managers: HSBC, BBVA, CITIC Securities Intl, China CITIC Bank
    Intl, Mizuho Securities
    Risk Rating: 3N
    LV: Indic 70%

  13. #1513
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    Issuer: China Resources Land Limited
    Issuer Ratings: Baa1 stable (Moody’s) / BBB+ stable (Fitch)
    Expected Issue Ratings: Baa1 (Moody’s) / BBB+ (Fitch)
    Format: Reg S Registered off MTN Programme
    Status: Fixed Rate, Senior Unsecured
    Issue Size: US$ Benchmark
    Tenor: 5 year | 10 year
    Guidance:
    5-year à T+300bps area (Indic 4.48%)
    10-year à T+340bps area (Indic 6.11%)
    Details: SEHK Listing, 200k/1k denoms, English Law
    Sole Global Coordinator: HSBC
    Joint Bookrunners: ABC International, Bank of America Merrill Lynch, DBS Bank Ltd., HSBC, J.P. Morgan, UBS
    Expected Timing: As early as today
    Risk Rating: 5yr – 3N | 10yr – 4N
    LV: 5yr – 70% | 10yr – 65%

    Profile:
    CR Land is one of the leading property development and investment companies in the PRC. Listed on the Hong Kong Stock Exchange in 1996, its shares have been a constituent of the Hang Seng Index since March 2010. As of 12 February 2014, CR Land had a market capitalisation of HK$111.7 billion. Its main sources of revenues include the development and sale of residential properties, rental income from operating investment properties and the provision of value-added services in the PRC.

    As of 18 August 2013, CR Land had development properties in 45 cities and investment properties in 31 cities in the PRC. CR Land have made significant investments in, and have interests in property development projects in, first tier cities in the PRC, such as Beijing, Shanghai, Guangzhou, Shenzhen and Hangzhou, where the property market has experienced growth in recent years. CR Land have also engaged in a number of projects in second-tier and third-tier cities such as Shenyang, Hefei, Chengdu and Chongqing. Its strategic focus in the future will be on growth opportunities in first- and major second-tier cities.

  14. #1514
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    Issuer: BP Capital Markets p.l.c.
    Guarantor: BP p.l.c.
    Issuer Ratings: A2 (stable) / A (positive)
    Expected Issue Ratings: A2 (stable) / A (positive)
    Type: Fixed Rate Senior Unsecured
    Tenor: 5 year
    Deal size: CNH Benchmark
    PRICE GUIDANCE:
    3.875% area
    Books
    Over 1bio
    Expected Issue Size
    CNH 1bio (Will not grow)
    Settlement: T+4
    Trade Date: 24-Feb-2014
    Settlement Date: 28-Feb-2014
    Maturity date: 28-Feb-2019
    Clearing: Euroclear and Clearstream
    Denoms: CNH1,000,000 x CNH10,000
    Format: Reg S
    Details: EMTN / London Listing / English Law
    Use of Proceeds: General Corporate Purposes
    Bookrunners: ANZ, BNP Paribas, Mizuho Securities, Standard Chartered Bank (B&D)
    Risk Rating: 2N
    LV: 75%

  15. #1515
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    Coupon not stated

    +++

    ISSUER: Bank of China Limited, Singapore Branch
    ISSUER RATINGS: A1 Stable / A Stable / A Stable (Moody’s / S&P/ Fitch)
    EXPECTED ISSUE RATINGS: A1 / A (Moody’s / Fitch)
    STATUS: Fixed rate, senior unsecured
    DOCUMENTATION: Drawdown off the USD10 billion MTN programme of Bank of China Limited
    FORMAT: Reg S, Registered Form
    SIZE: CNH Benchmark
    TENOR: 2 Years | 5 Years
    USE OF PROCEEDS: General Corporate Purposes
    DETAILS: SGX Listing, CNY1,000,000 x CNY10,000 denoms, English Law, Euroclear/Clearstream
    JOINT BOOKRUNNERS: Bank of China, DBS Bank Ltd., OCBC Bank, Standard Chartered Bank
    CO-MANAGER: Agricultural Bank of China Limited, Singapore Branch
    Expected Timing: As early as today
    Risk Rating: 2N
    LV 2yr - 80% | 5yr - 75%

  16. #1516
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    Quote Originally Posted by cbsh38584 View Post
    TRAFIGURA SGD PERP bond priced at a fixed rate of 7.5 is very attractive to me.

    As I do not want to increase my bond holding. So I decide to sell away hyflux 5.75% Perp bond @ 100.25 & switch out to a higher coupon TRAFIGURA SGD 7.5% PERP bond (issued 2 weeks ago) @100.05.


    TRAFIGURA USD PERP bond priced at a fixed rate of 7.625%, was met with very strong interest last year, Apr 2013. Price to buy is @102 now for USD perp bond. So I think the TRAFIGURA SGD perp may have some room to go up beyond 100. Do not intend to hold long term. Once my tgt is met, I will sell it .

    USD interest loan rate came down a bit from 1.05% to 0.998%. SGD interest loan rate is @ 1.06%.


    Also apply S$20k for the retail capitalmall trust bond 3.08%. Only got S$11k. Price to sell from SGX screen is $1.008. No custodian fee for retail bond.


    rdgs,
    Vic
    Hi Vic,

    May I know which bank is offering SGD 1.06% borrowing rate and the rolling tenor? I have some Trafigura perp with CS with financing at 1.56%-1.57xx% on monthly roll basis. Is there some strategy to nego on these rates as I was being told that they are pricing it on Sibor + 1.2% spread.

  17. #1517
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    Quote Originally Posted by banana55 View Post
    Hi Vic,

    May I know which bank is offering SGD 1.06% borrowing rate and the rolling tenor? I have some Trafigura perp with CS with financing at 1.56%-1.57xx% on monthly roll basis. Is there some strategy to nego on these rates as I was being told that they are pricing it on Sibor + 1.2% spread.
    I am a active investor. High volume. U can tell your banker that other banks offer lower than 1.4% & get them to lower it. I believe U can nego lower to 1.35% to 1.4%.

  18. #1518
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    U are over-paying with CS, if I might be blunt... the good news is probably cause they think you are very rich, which is a good "problem" to have

    I'm not a private banking customer, but my banker can offer me 1-year fixed lending against my bonds for leverage purposes at 1.21% fixed. 1- / 3-month interest rates are lower than that. Mine's on cost-of-funds + margin basis.

    Quote Originally Posted by banana55 View Post
    Hi Vic,

    May I know which bank is offering SGD 1.06% borrowing rate and the rolling tenor? I have some Trafigura perp with CS with financing at 1.56%-1.57xx% on monthly roll basis. Is there some strategy to nego on these rates as I was being told that they are pricing it on Sibor + 1.2% spread.

  19. #1519
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    Today's issuance:

    *** NEW ISSUE: PING AN 5.5-Year SGD ***
    Issuer: Value Success International Limited.
    Guarantor: China Ping An Insurance Overseas (Holdings) Limited.
    Keepwell Provider: Ping An Insurance (Group) Company of China, Ltd.
    Status: Senior, unsecured
    Issue Rating: Unrated
    Issue Size: TBD
    Format/Docs: Reg S / Section 274 and 275 of SFA (Singapore) /registered / Issuer’s USD 2 billion MTN Programme
    Price Guidance: 4.375% Area
    Tenor: 5.5-Year
    Denomination: SGD250K
    Governing Law: English Law
    Listing: SGX-ST
    Clearing: Euroclear
    COMPARABLES
    Vanke SGD 3.275% 2017 100.05 3.26%
    Henderson Land SGD 4% 2018 103.55 3.15%

  20. #1520
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    Tradehaven's commentary below. Apparently final application book topped $2.2b

    +++

    If the question “Why Are They Issuing In SGD For Their First non CNH Issue ?” did not cross your mind, I suggest you call your banker up and ask “What happened to all those Tata bonds issued last year ?” (which you obviously have not bought or you would have asked the aforementioned question)
    This is the imaginary conversation I am dreaming up between banker and client.
    Client : Why is Ping An issuing in SGD dollars ?
    Banker : For working capital etc etc etc
    Client : Why is the issue not rated ?
    Banker : Ping An Insurance Group Co China Ltd, the keepwell provider is rated AAA by Dagong Global Credit. China Ping An Insurance Overseas (Holdings) Limited, the parent of Value Success International is similarly unrated. Another subsidiary of the ultimate parent, Ping An Property & Casualty Insurance is rated A (-ve outlook) by the S&P.
    Client : Why should I buy this bond ?
    Banker : Ping An sees an opportunity in raising money in Singapore and Singaporeans are savvy bond investors. This is a rare opportunity to buy at such a good yield. There is a great deal of demand especially from Chinese investors to put their money into SGD.
    Client : That is what you said about Tata bonds last year.
    Banker : Aha…. That is a different story ……..blah blah blah…
    Ping An is one of the gems of the SHCOMP with a 1.2% weightage (9th highest) on the index, much like Tata weighs heavy in India.
    Lets see where the Tata bonds are in SGD (Tata International has not price so I left it out).
    Tata Motors TML Holdings 4.25% 05/2018 96.75/97.75 cts
    Tata Communications 4.25% 02/2016 99.50/100.25 cts
    Tata Steel ABJA Investment Co 4.95% 05/2023 88/89 cts
    To be caustic, Ping An is here because Singapore is sufficiently illiquid and can be trusted not to sell off too much besides the fact that Singaporeans are known for their generosity.
    Having said that, the pricing is fair compared to their CNH issuance levels which means they could have exhausted their CNH fund pool (after raising CNY 1.6 bio so far this year) and have ventured farther afield for funds. And I can make an educated guess that the probability of a Ping An bailout if ever, would be far higher than the probability of a Tata bailout.
    Comparing the price of 4.375% to the other investment grade Chinese name in SGD bond space, Vanke of Bestgain Real Estate 3.275% 11/2017 which is going at around 100, this bond looks attractive. Cenchi, Shuion and United Envirotech are not really comparable.
    Risks :
    The structure is complicated. Issuer is SPV, guaranteed by China Ping An Insurance Overseas which has a keepwell agreement with Ping An Insurance Group.
    Group assets have grown 4x in 5 years to Dec 2012 vs China Life 2x in 5 years.
    Needless to say capitalisation is weak and assets quality is a big unknown since disclosure is scanty.
    Note that a keepwell agreement is a common and legally weak form of guarantee that chinese companies use for their offshore deals that falls far short of an explicit guarantee. But it is universally accepted so far.
    No, I should not be thinking about Tata bonds but I just cannot help it. Books are now well in excess of SGD 300 mio by now.


    Quote Originally Posted by starrynight View Post
    Today's issuance:

    *** NEW ISSUE: PING AN 5.5-Year SGD ***
    Issuer: Value Success International Limited.
    Guarantor: China Ping An Insurance Overseas (Holdings) Limited.
    Keepwell Provider: Ping An Insurance (Group) Company of China, Ltd.
    Status: Senior, unsecured
    Issue Rating: Unrated
    Issue Size: TBD
    Format/Docs: Reg S / Section 274 and 275 of SFA (Singapore) /registered / Issuer’s USD 2 billion MTN Programme
    Price Guidance: 4.375% Area
    Tenor: 5.5-Year
    Denomination: SGD250K
    Governing Law: English Law
    Listing: SGX-ST
    Clearing: Euroclear
    COMPARABLES
    Vanke SGD 3.275% 2017 100.05 3.26%
    Henderson Land SGD 4% 2018 103.55 3.15%

  21. #1521
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    If U are a new investor that just join in PB. Pls do not trust or NEVER NEVER the bank recommendation. U need to have a alternative input from other sources. Some PB will not hesitate to let U leverage more. Sometimes, we are too greedy on the high yield side that we have forgotten about the high risk that come with it.

    Need to do a quarterly "housekeeping" on our investment portfolio to ensure NO over borrowing & whether there is a need to rebalance our portfolio to reduce the risk.

  22. #1522
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    I am not a bond investor.
    About Ping An, what I want to say is that it is too big to fall in China. Therefore, I think it is quite safe.

    As far as why it will issue a bond in SG, the reason I can think of is that the cost will be much higher if it issues a bond in China. In SG, a good choice for curency is S$.

  23. #1523
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    u have a $3m bond portfolio. u mentioned loan is about USD 1m, so at about S$1.27m, ur equity contribution is about $1.73m. if u made $260k in 2013, that means the net annual return is around 15% p.a.?

    very decent returns for a bond portfolio.

    Quote Originally Posted by cbsh38584 View Post
    Started to invest in Bond only in 2010 using equity loan buying blue chip bond like DBS pref share bond , Capland & capital com trust convertible bond. Have sold & switched to higher risk bond with high yield 5% to 10%.

    Net return minus borrowing cost ave 1.1% & Custodian fee 0.25%
    =========================================
    2010 = 30k

    2011 = 70k (coupon + bond sold off with capital gain)

    2012 = 140k (coupon + Bond sold off with capital gain)

    2013 = 260k (Coupon + Bond sold off with capital gain)

    2014 = est 190k (only coupon - Current bond holding est $3m)
    Not much capital gain in 2014.

    2015 = est 180k (only coupon)

    2016 = est 180k (only coupon)

    Holding junk bond is very risky. In 2011, the Greece crisis caused one of my Junk bond , Chinese developer Evergrande RMB bond (7.5%) dropped from 96 below 60. While capland bond only drops less than 10%. After the crisis, Evergrande bond price move up to 91.

    In June12, Muddy water claimed that there is a massive fraud and imminent insolvency at Evergrande . The bond price was sold off from 91 to to 72. I manage to ride through the crisis & sold @ 101 in Apr 13. The evergrande bond will mature this year on 19th Jan14.

    In Nov12, Muddy waters claimed that Olam runs a high risk of failure. All the Olam bond USD/SGD was sold off (10% to 25%) . According to the UOB banker, there is a margin call on OLAM bond as it was given a LTV b4 muddy water report . I bought My OLAM USD 5.75% bond due 2017 in Sept 12 during the IPO. It was sold off from 100 to 76 in Nov12. It has recovered to 95 now. If I will to sell now, I would probably breakeven after deducting the borrowing cost + custodian fee.

    I have managed to find Bond as an alternative some of income since 2011. Stock market is too manipulative. I have learnt a lot after the 08/09 crisis. Never trust the foreign/local bank research report , our SG stock GURU , your friends , your relatives , your broker/ remisier etc. They cannot be trusted because most of the time they get the timing wrong. Only trust FEAR. You will never be wrong if your trust FEAR. FEAR is your best friend when comes to investing.


    rdgs
    Vic

  24. #1524
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    Quote Originally Posted by bargain hunter View Post
    u have a $3m bond portfolio. u mentioned loan is about USD 1m, so at about S$1.27m, ur equity contribution is about $1.73m. if u made $260k in 2013, that means the net annual return is around 15% p.a.?

    very decent returns for a bond portfolio.
    Part of it is due to bond capital gain which I have sold off & switch out to another bond. My bond holding was est >S$3m in early 2013. I sold off to take profit for some of the bond in Feb13 to Apr13 to reduce to S$3m. It has been S$3m till now.

    I am more of a risk taker. I buy China developer junk bond @ 100 or below 100. Yield around 6.5% to 11%. It can drop >20% during crisis & recover back when everything stabilise . China developer name like evergrande CNY (7.5% -sold off @101) , Shui On SGD (8% - sold off @104) , Central China real estate SGD (10.75% - will take profit soon @108) , Kiase USD (8.8%) etc etc etc. Ave LTV 55%. I will reduce my exposure to China real esate bond in the near future. Don't intend to keep till maturity. Too risky. Singapore good companies corporate bonds are not volatile. More stable.

    I do check those unit trust that offer high yield Asian bond fund & will look for their top holding. Then I will get my banker (at least 2) for their view. This is one of the way I pick the bond to buy.

    Take note that some insurance companies do carry the above mention junk bond. But the % I believe is small.

    This bond forum http://tradehaven.net/ is very informative. We can learn from him more.

  25. #1525
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    Just FYI. From SG market talk forum.
    Need to be extra careful in high yield Perp bond. Will probably sell once it hit my tgt.


    Trafigura Beheer issued a SGD and USD bonds in excess of 7% yields in Singapore. Marke- insiders told me that they were used by evil bankers to repackaged into financial products and offloaded to high networth clients.

    Using $250K, a client can own $1m of Trafigura Beheer's bonds:
    Cost of Capital: $250K x 0%
    Cost of financing bankloan: $750k x 2% = $15000 (actually appx 1.8%pa)

    Bond Coupon Income = $1000K x 7.5% = $75000
    Nett Returns = $75K - $15K = $50K

    Using $250K, the client makes 50K a year, so effectively he thinks that his "Return on Capital" is 20%. Fantastic right? (as good as my friend) Imagine, if the client goes for 10x gearing, his Return on Capital will be 57%pa.


    In both real-life examples, the investors are taking too much underlying risks. This is not the way we should live our life:
    Property: loss of rental income, drop in property value, surge in SIBOR rates

    Bond: Default risk, drop in bond prices, surge in SIBOR rates

    After screwing us with minibonds (repackaged financial products), Accumulators (i-kill-u-later options contracts), our brilliant RMs continue to engineer more financial products with maximum leverage to sustain their business volume.

    Bond investment should be kept simple.

  26. #1526
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    Thanks for the input on borrowing rates. Sibor did creep up in the recent 3-6mths, but nonetheless had my suspects that I might be overpaying at 1.56/57% pricing on one monthly rollovers. I will contemplate to fund up all the leveraged positions if it comes to a non-negeotiable standoff when I ask for a more reasonable rate in the near future with 1.40% as ceiling expectations.

    On the part of of Trafigura, I recall reading (either here or Tradehaven) that the LTV is offered at 60% at CS but non at other PB outlets nor retails. Some was saying this is in part due to the fact that CS was one of the 4 bookrunners. I did not verify whether any gearing was offered elsewhere, but can confirm that it is indeed 60% at CS. It's interesting to hear about the possibility of 300% LTV where 250k position is offered 750k financing, but concurrently also alarming that it's happening to this name which I like pretty much.

    I am pretty risk adverse, I won't normally consider perps given a rising yield environment, and I won't touch CNY/CNH denoms, or China incorporates. But for Trafi, what sold me was the issuer itself, the yield sounded fair despite that it had to be a perp. But looking at it the other way when considering the firm isn't listed, the only way into gaining exposure would be through its debt issue. Comparatively, if Olam was offering identical terms on a perp, I wouldn't subscribe, and telling me Temasek or the likes is in bed with them won't make me sleep any easier. Only downside thus far is perhaps the 50 cents rebate on Trafi, and the less FMCG type brand name that probably contributes to its pricing being kept under par.

    Happy Weekend guys!

  27. #1527
    Join Date
    Jun 2008
    Posts
    1,569

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    Quote Originally Posted by banana55 View Post

    On the part of of Trafigura, I recall reading (either here or Tradehaven) that the LTV is offered at 60% at CS but non at other PB outlets nor retails. Some was saying this is in part due to the fact that CS was one of the 4 bookrunners. I did not verify whether any gearing was offered elsewhere, but can confirm that it is indeed 60% at CS. It's interesting to hear about the possibility of 300% LTV where 250k position is offered 750k financing, but concurrently also alarming that it's happening to this name which I like pretty much.
    Uh, if you are with CS or any private banks, it is pretty common for them to give you a pre-approved credit limit and you can actually use that to buy bonds without coughing out any of your money. It is leveraged on your total AUM.

  28. #1528
    Join Date
    Jan 2011
    Posts
    1,081

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    I told my friend that CS gives a very high LTV as compare to other PB. Especially those small issue size SG corporate bond like Lippomall , Banyan Tree , Petra food , OUE etc.

    The SGD financing cost for him is 1.35% as a new acct. Pls take note that they like to give investors full maximum leverage.

    In 2006/07, I did a lot of Accumulators (i-kill-u-later options contracts). It is easy money to earn at that time. I have US$6 million plus contract at that time . It is almost > 300% over leverage. So they don't care about the investor taking extreme high risk with MAX leveraging. I manage to survive (cut loss fast) & learn from the worst experience in my life. My RM has set a goal for herself to hit $1m commission at that time. She was asked to leave the bank in 2008 (sack ?).

  29. #1529
    Join Date
    Aug 2009
    Posts
    2,988

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    Interesting to c u do a switch to this Tr bond after placement .... this has been traded below par since issue, did u get a gd price ? Banks sure like you as you trades often, even on bonds. In/out already earn the bid/offer spread. U trade bond like trading stocks, not the average bond investors we know many bonds we hold till maturity /called ...

  30. #1530
    Join Date
    Jan 2011
    Posts
    1,081

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    Quote Originally Posted by amk View Post
    Interesting to c u do a switch to this Tr bond after placement .... this has been traded below par since issue, did u get a gd price ? Banks sure like you as you trades often, even on bonds. In/out already earn the bid/offer spread. U trade bond like trading stocks, not the average bond investors we know many bonds we hold till maturity /called ...

    There is a bull for fixed income from 2011 to early Apr 2013. During this period, it is easy to make $$$ from capital gain ( 3% to 6%) plus coupon after holding for a few mths.

    After May13, no more huge capital gain. Maybe the most is 1%+ for good quality name. Those Perp bond & junk bond went below par. Some more than 10%.

    My RM is kind enough to take only one commission (0.20) when I sold Hyflux & bought Trafigura on the same day. Sold [email protected]. Bought [email protected]. My profit for hyfux is S$1420 holding less than a mth.

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