SGD bank perpetuals prices at 1Y low

In the past 1 month, there were a number of new issues of bank perpetuals. Together with US 10Y Treasury back to 3%, the prices of bank perpetual bonds are now at 1 year low:

  • These are 250,000 size  perpetual bonds with resets on their call dates.
  • They are all Basel III bonds. The local bonds may be written off if there is a trigger event and agreement by MAS. HSBC bonds may be converted to shares if there is a trigger event and agreement by BOE.
  • As the call dates increases, the YTC also increases.
  • Existing holders of these bonds will be happy to know that even with interest rates increasing and prices at 1 year low, these perpetual bonds prices are still resilient.
  • There are no obvious bargains at the moment. If I were to choose, I would prefer a bond with call date about 2Y or 3Y left. That would be OCBC 3.8% or UOB 4% perps.

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