Opportunities in OTC bonds (SGD)

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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