As USD 10Y Treasury yield crosses 3%, SGD denominated bonds are at fair value.
My SGD bond watchlist
These are the bonds that I want to buy if the bond prices drops. The following stands out at the current moment.
(1) LippoMalls 7% perp
- The price has been beaten down because
- occupancy rate dropped
- Moody’s downgrade of LippoMalls and its sponsor
- new Indonesia tax laws on withholding tax
- YTC of 6.74% and supercharged yield of 15.34% makes this bond mouth watering.
- Reset at 5Y SOR + 5.245% makes it likely that LippoMalls will call back the perpetual bond in 2022.
(2) First Reit 5.68% perp
- YTC of 5.18% and supercharged yield of 9.95% is very decent returns for a strong company.
- Call date in 2021 makes it resistant to interest rate increase.
- Stable earnings
- WALE (weighted average lease expiry) of 11 years
- No forex risk
- Not affected by new withholding tax laws
(3) UOB 4%, Mapletree Log 4.18%, and Ascott 4.68% perpetuals
- All 3 investment grade bond offers better returns than what our banks’ fixed deposits.
- Of these 3, my preferred Ascott 4.68%, giving YTC of 3.85% and supercharged yield of 7.07%. Call date in 2 years in 2020. 45% ownership by Temasek.
Are perpetuals penalized when interest rates increase?
Yes, so I have carefully selected these perpetuals based on a near call date and with good coupon reset if they are not called.
If you have questions on these bonds, please contact me.
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