Opportunities in OTC bonds (USD)

As USD 10Y Treasury yield crosses 3%, some USD denominated bonds have become attractive.

My USD bond watchlist

The following stands out at the current moment.

(1) Bank of East Asia 5.5% perpetual

  • A Hong Kong bank that is part of the blue chip Hang Seng component stocks.
  • Had a very solid 2017, tripling its profits
  • Market Cap is HK$97B
  • Debt to Asset is 7%, and Total Debt to Equity is 74%. These are very low debts for a bank!
  • Have always been paying dividends
  • Price at about par value, YTC at 5.4%, and supercharged yield at 11.43%.
  • Call in 2020 and reset of 5Y UST + 3.834% makes this bond resilient against interest rate increase

(2) Standard Chartered 6.5% perpetual

  • Price at about 102.70, YTC at 4.88%, and supercharged yield at 10.07%.
  • Call in 2020 and reset of 5Y swap + 4.889% makes this bond resilient against interest rate increase

(3) Olam 5.35% perpetual

  • Price at about 98, YTC at 5.93%, and supercharged yield at 13.2%.
  • Call in 2021 and reset of 5Y UST + 6.29% makes this bond resilient against interest rate increase

Perpetuals prices normally drops when interest rates increase. However, I have carefully selected these perpetuals based on a near call date and with good coupon reset if they are not called.

All USD bonds contains associated forex risks.

If you have questions on these bonds, please contact me.


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