BOND THREAD

[chestnut]

Chestnut,

Here is what Bernanke said:

"The market crash of October 1929 showed, if anyone doubted it, that a concerted effort by the Fed can bring down stock prices."

http://www.federalreserve.gov/boardd...22/default.htm

Thanks. Will read it.

OK. Read the lead up to the crash. Agreeable with you on that. But the stocks were already in pure speculative mode and the bubble was humongous. If the implementation was done prior to the bubble being that big, the great crash would not have happened.
I will post how much speculation was involved in a while. Stay tune.

[chestnut]

Secretariat,

http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929

The key note is

"By August 1929, brokers were routinely lending small investors more than two-thirds of the face value of the stocks they were buying. Over $8.5 billion was out on loan,[17] more than the entire amount of currency circulating in the U.S. at the time."


So the key point is when interest rate increase, what will happen??? Bottomline, the bubble was too huge.

[Laguna]

Secretariat,

http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929

The key note is

"By August 1929, brokers were routinely lending small investors more than two-thirds of the face value of the stocks they were buying. Over $8.5 billion was out on loan,[17] more than the entire amount of currency circulating in the U.S. at the time."


So the key point is when interest rate increase, what will happen??? Bottomline, the bubble was too huge.

so, does not mean that if interest rate is near zero, the bubble will grow even bigger...

[chestnut]

so, does not mean that if interest rate is near zero, the bubble will grow even bigger...

Are u joking with me or pulling my leg... You so sophisticated leh...

Ok, I think you teasing me... but I give my explanation for fun.

Take stocks for example. Qualification : we take 100% of those who will play the market. Not 100% of the population.OK.
So if market going up and only 30% in market, the market will continue to go up (assume economy well, people spending etc...), another 20% looking at the uptrend, will buy, then another 20% and it continues..... If all 100% bought, that's it.... right? But if everyone thinks hey, this one surely make money and interest rate is so low, must as well leverage. So the leverage at low interest rate causes the price to go up to way above its value. It will break one day. So interest rate go up and govt stop this leverage, stocks cannot go up and stay flat, you are now losing money (say interest rate shoot to 3%). So now when u hold the stocks, you lose 3% every year. So people start selling and it causes a crash.

So, with interest rate low, the govt is afraid of run away prices of property prices.

If say property today at 1mil and shoot to 2 mil and salary cannot catch up and so many people bot that no more can buy, then how. Supply outstrips demand, prices will drop.

I really do not see prices to be beyond its real value because you need to take in inflation. So if you ask me, is the govt correct to implement CM. My view is yes, if not prices will over run. So it is for a better cause. At the same time, people who invest in properties and make money will become lazy with passive income and will cause productivity to drop.
But if you are a smart trader, you will be frustrated. You hope prices will rise and quickly get out. The issue is, many think they are smart traders but greed will overcome them.

As I type, I keep drifting. Sorri, very difficult to share because typing is not my forte. I am only good in talking. Hahahahaha

The key is to understand the human behaviour and market dynamics to stay on top. There are just too many variables here to list to watch out for. Interest is just 1.

It is like driving, you need to do multiple things just to drive. How to describe???

I give u some variables to think about
- fear of inflation
- low interest rates
- Job stability
- fear of losing out on the bull run
- aspiration
- Supply/Demand
- GLS
- etc....
And the list goes on. You just need to put all of it together to get a holistic view.

[chestnut]

bro/sis, did I drift? Your views please. Must share leh. I quite goondoo you know.

[Laguna]

Are u joking with me or pulling my leg... You so sophisticated leh...

Ok, I think you teasing me... but I give my explanation for fun.

I was just back from a good facial...(men go facial is normal nowadays) and about to get into the pool, so in between just posted a short question without thinking much.

Anyway, will give some time to think...I am now in holiday mood alr....

[stl67]

I used less than 1.6m cash.I borrowed >1.6M. My coupon is in the range of 7%. If I use the cash 1.6m to buy property, how to get 180k to 200k/yr return. I need to make full used of low interest for the next 2-3 yrs (2010 to 2014) to make as much as possible. Will monitor very closely the sign of raising rate. Will probably sell some in 2014.

I told many of my friends in early 2011 that there are money to be make in bond due to the QE. When I told them they need to leverage it to get a better return. They dare not. Seem to risky to borrow.

wah i miss this thread as was away travelling for nearly a month.

you got time to drink beer... all on me... you can teach me as I am plannng to take up equity loan and do some 'bonding' like you... no joke.. pls pm me when you got time... when it comes to all these, i still blur blur

[Laguna]

wah i miss this thread as was away travelling for nearly a month.

you got time to drink beer... all on me... you can teach me as I am plannng to take up equity loan and do some 'bonding' like you... no joke.. pls pm me when you got time... when it comes to all these, i still blur blur

pl include me as well.....

[stl67]

pl include me as well.....

swee... i buy beer..

[Laguna]

swee... i buy beer..

I buy nuts

[price]

I buy nuts

can i join in? i crack and peel nuts

[focus]

can i join in? i crack and peel nuts

Walau... can i join in as well!
You all can throw on the floor .. i sweep the floor and clear up after you guys!

PM ME!!

[Laguna]

ya, just came back from Skyfall...

I think, we shall start a SIG in bond

[price]

ya, just came back from Skyfall...

I think, we shall start a SIG in bond

i was reading some old posts, read that u were organising a CondoSG BBQ. anymore of such coming up?

[Laguna]

i was reading some old posts, read that u were organising a CondoSG BBQ. anymore of such coming up?

I just put in a bottle of white wine in the fridge for u.
No one responded to my BBQ.

[dtrax]

I just put in a bottle of white wine in the fridge for u.
No one responded to my BBQ.

can have a potluck gathering instead lol

[Laguna]

can have a potluck gathering instead lol

potluck : no problem

Signature dish here from Laguna is Popiah....

[price]

I just put in a bottle of white wine in the fridge for u.
No one responded to my BBQ.

thanks a lot! let's organise another one!

[dtrax]

thanks a lot! let's organise another one!

gd idea haha

[East Lover]

potluck : no problem

Signature dish here from Laguna is Popiah....

Do u want to invite ah tan???

[cbsh38584]

wah i miss this thread as was away travelling for nearly a month.

you got time to drink beer... all on me... you can teach me as I am plannng to take up equity loan and do some 'bonding' like you... no joke.. pls pm me when you got time... when it comes to all these, i still blur blur

I started to invest in Bond only 2010. So I am not a expert in bond.
I aggressively buy bond due to the QE2 , QE3....Likewise many investors buy property due to the QE.

An equity loan is a mortgage loan in which the borrower receives cash. The loan is secured by real estate already owned outright.

Assume your property bought in 2005 @ $1m is now worth $1.7m
Mortgage loan interest rate fixed 3 yrs @ 1.5%. The bank may allow a drawdown of a 500k @ 1.5% interest rate base on your current property value. If U dont use the 500k, no interest is being paid to the bank. Only when U starting using it.
U can use the 500k to buy stock , unit trust, bond etc etc. If U mismanage your 500k investment by buying speculative stock , high risk unit trust , FX etc . U will be in deep trouble if mkt turn against U .U need to top up cash if there is a MARGIN CALL. The very Worst case is that U need to sell away your property. Your relationship manager will explain to U.

I suggest U buy short dated (2015/16) STRAIGHT , quality & liquid bond (size >$300M). All depend on your risk level. I suggest buy IPO bond or wait till next year when there is a big correction in the stock mkt. The bond price may drop 1-3%. Get your ONLY EXPERIENCE relationship mgr to advise U. U can refer to THE EDGE Magazine for the list of ONLY SG dollar corporate bond pricing.

My bond holding.
ABN , OLAM , Noble , Banyan Tree , OUE , Lippomall . Shui ON , PETRA Food , Cheung Kong , Hutchison , Citi pacific etc etc.

I do have CapitaLand & Capital commerical trust yielding 3% to 3.9%.. But hv sold off last yr to seek higher yield.

　

　

Rdgs,
Vic

　

　

[stl67]

Thanks Vic. I will do some reading.

[Laguna]

Do u want to invite ah tan???

Ah tan has already calculated the transport cost of bringing 9 to my place is far exceeding the cost of food I am providing even for him to come empty handed.

[Laguna]

I suggest U buy short dated (2015/16) STRAIGHT , quality & liquid bond (size >$300M). All depend on your risk level. I suggest buy IPO bond or wait till next year when there is a big correction in the stock mkt. The bond price may drop 1-3%. Get your ONLY EXPERIENCE relationship mgr to advise U. U can refer to THE EDGE Magazine for the list of ONLY SG dollar corporate bond pricing.

If u are looking for liquid, then $300m is still considered as a small issue.
For short dated straight bond, unless u got it during IPO, then at par. If not, u always have to pay quite a higher premium over OTC.

Question to Vic : why u think there could be a big correction is the stock market and causing bond to drop 1-3%? are u reading a up in the interest rate?

[cbsh38584]

If u are looking for liquid, then $300m is still considered as a small issue.
For short dated straight bond, unless u got it during IPO, then at par. If not, u always have to pay quite a higher premium over OTC.

Question to Vic : why u think there could be a big correction is the stock market and causing bond to drop 1-3%? are u reading a up in the interest rate?

The US fiscal cliff , European debt crisis & Iran Crisis etc will be in the focus again after US election. So I beieve the mkt will be due for correction, NOT CRASH. If US mkt really CRASH. The Fed will start printing money again. I think interest rate will remain low till 2014 as many government are printing money that including the recent Bank of Japan additional monetary easing measure.

Bond price may drop between 1-3% if base on last yr crisis. I do monitor the bond price movement since last yr. It did drop around 1-3%. Some perp bond may drop (>5%) even more. Pls take note that I am not the expert in bond.



rdgs,
Vic

[Laguna]

The US fiscal cliff , European debt crisis & Iran Crisis etc will be in the focus again after US election. So I beieve the mkt will be due for correction, NOT CRASH. If US mkt really CRASH. The Fed will start printing money again. I think interest rate will remain low till 2014 as many government are printing money that including the recent Bank of Japan additional monetary easing measure.

Bond price may drop between 1-3% if base on last yr crisis. I do monitor the bond price movement since last yr. It did drop around 1-3%. Some perp bond may drop (>5%) even more. Pls take note that I am not the expert in bond.

rdgs,
Vic

Thanks Vic for the sharing.
If the price drops 1-3%, it is not that significant.
Regarding fiscal cliff, somehow, I find that it is not going to be that big event, and I believe, they will raise the debt ceiling again as they are given no choice.
For the European crisis, the bond issues in Italy and Spain have been rather stablised these few months.

We have just to keep our fingers cross, and hope for the best.

US President : we will know the result very soon

[Laguna]

this is what I wrote on the other thread, copied over here as I just want to have issues concerning bonds be captured in the same thread

Perhaps let me share my in interest rate. I am not an economist, just a layman / laywoman's view.

Why interest rate goes up? Some of the main reasons are :
1. tight credit during economy expansion
2. high inflation
3. change in monetary reserve requirement due to over-heating
4. central bank policy.

Next we examine the foreign reserve of Singapore.
http://www.mas.gov.sg/Statistics/Res...-Reserves.aspx
Without much of breakdown, my told me that main currency in our foreign reserve is in US$, those with IMF and gold is for sure. US$ is still the world currency.

Will Singapore Interest rate goes up?
the answer is definitely YES as we are now almost at all time low, cannot be much lower, the only way is sideway or up. But longer term is definitely up. When and How much are the questions to be answered.

When Singapore Interest Rate will go up?
No one know. But MAS in the last two years, is allowing S$ to appreciate and keep interest rate low to fight inflation. Strong S$ hurts our export badly. Even with that in mind, why MAS still prefer stronger S$ than higher interest rate? The only reason I have is, with such low interest rate, S$ is already so strong, if S$ interest rate goes up, our S$ is going to be much stronger and attracting even more hot money which Sg Govt does not want.

On top of that, Sg is earning peanut interest from US$ reserve, so, look at the latest HDB bond, that is the rate Sg Govt willing to pay.

We can afford to have very low bond yield for the Govt Securities as Sg is being graded as AAA.

Next US$ interest rate.
US debt now is running at US$16.3T, some of the US 30 years treasury was issued at 7% years back. The ghost bro sent a link that US Govt is paying US$4b daily on interest. My calculation is around US$2.6B daily. So, does US Govt has the money to pay more interest if rate goes up?

US is now printing themselves out of debt and recession. So does ECB and BOJ.

Stop writing here.

[Laguna]

this is the risk of straight bond. This bond when issued, OLAM was a big name.

Olam's unrated US$500 million of 5.75 per cent, five-year notes issued at par in September have tumbled to 85.059 cents on the dollar to yield 9.716 per cent as of 5.02pm in Singapore, according to prices compiled by Bloomberg.

Sept : I think refer to 2012 Sept

[Laguna]

Olam bond prices sink to record low

Investors waiting to see how battle with Muddy Waters will pan out



By alvin foo

OLAM International's share price may have rallied in recent days, but the same cannot be said of its bonds.

Some of them hit all-time lows yesterday and on Thursday as investors awaited more clarity on its ongoing battle with research firm Muddy Waters.
Olam's perpetual bond, issued at par with a 7 per cent yield, traded at a record low of 75.439 cents to a dollar on Thursday, according to Bloomberg data. Barely a day earlier, this bond was done at 93.421 cents. Yesterday, it was changing hands at 76.442 cents with a yield of 14.661 per cent.
Bond yields rise as prices fall.

Yields on Olam's five-year bond, issued at par with a 5.75 per cent coupon, climbed to a record of 10.034 per cent yesterday. It was trading at just 83.997 cents to a dollar.

A bond expert who declined to be named said: "The liquidity is still quite low, which means that not many people are willing to sell. Most are waiting on the sidelines to see if there will be more clarity."

But market experts cautioned that Olam's bond prices could head further south next week as the firm's confrontation with the short-seller has escalated.

Yesterday, Muddy Waters stepped up its war of words with Olam with a provocative challenge to the company over its debt levels and a stinging attack on its boss Sunny Verghese.

"Bond investors scrutinise the company's balance sheet more, especially the fine print, while equity investors look more at the profit and loss statement," said APS Asset Management chief investment officer Wong Kok Hoi, whose firm does not own any Olam bonds.

"The selling looks likely to continue next week because of balance sheet concerns. Bond investors are concerned about the company's ability to refinance the short-term loans and bonds, the much higher interest costs the company has to bear," he added.

Olam shares closed at a recent low of $1.50 on Wednesday, but rebounded to $1.575 yesterday. They are down 26 per cent for the year.
Olam, whose debt is not rated by any agency, has US$5.8 billion (S$7 billion) in outstanding debt, of which US$2.89 billion is in bonds, according to Bloomberg.
A fund manager said: "The short-term bonds seem a worthwhile bet currently. The risk of not getting back the principal seems low, given the strong, convicted defence by Olam's board."

Mr Verghese on Thursday said his firm was "willing and ready" to support the bonds if there is "panic". Olam bonds have been generally well subscribed. For instance, its $100 million issue in July last year was subscribed more than 10 times, receiving $1.1 billion in orders and so was upsized to $250 million.
[email protected]
Copyright © 2012 Singapore Press Holdings. All rights reserved.

[moneytalk]

[QUOTE=Laguna]Olam bond prices sink to record low

Investors waiting to see how battle with Muddy Waters will pan out


Hey laguna,

Can buy this bond if the price drop by another 10 to 20 cents?