SGD Bonds – Strategy Relative value search May 8, 2020 220

  • We scan the local corporate bond universe to discover bonds trading cheaper on a relative basis, with focus on issuers with healthy credit profiles
  • SGD corporate bonds are denominated in lot sizes of S$250,000

 

CAPLSP 3.65% Perpetual Corp (SGD) [2.94% YTW, 3.45% YTC] – CapitaLand Ltd

Within the CapitaLand issuances, we see value in the CAPLSP 3.65% Perp (3.45% yield to call) offering a wide 86bps senior-sub spread pick up to the comparable CAPLSP 3.8% ’24s (2.67% yield to maturity) which matures 50 days earlier. The CAPLSP 3.65% Perp comes with a 100bps coupon step-up on 17 October 2029 (5 years after the first call date of 17 October 2024).

 

 

DBSSP 3.98% Perpetual Corp (SGD) [2.58% YTW, 3.50% YTC] – DBS Group Holdings Ltd

Recently, in light of UOB calling its UOBSP 3.5% 22 May 2026 Corp (SGD) bond on 22 May 2020 despite a lower refix coupon, we find comfort that our local banks are seeking to ease bondholders’ concerns on non-call risk. Assuming our local bank bonds are called at their call dates, we find yields in bank perpetuals interesting given their investment grade ratings. We see value in the DBSSP 3.98% Perp (3.5% yield to call) trading at similar spreads to the UOBSP 3.58% Perp (3.54% yield to call) callable 308 days later.

 

STHSP 3.95% Perpetual Corp (SGD) [3.72% YTW, 4.30% YTC] – Starhub Ltd

In the telco space, we like the STHSP 3.95% Perp (4.30% yield to call and 3.72% yield to worst). Although with a weaker step-up structure five years after the first call date, we think its yield to worst spread of 294bps in the event of non-call still offers an attractive 118bps senior-sub spread pick up to the comparable STHSP 3.08% ’22s. If called at first call, the bond’s yield to call spread is 352bps.

 

 

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Timothy Ang
Research Analyst
Phillip Securities Research

Timothy covers credit analysis of local and foreign bonds. Previously an equity dealer, he handled equity trade execution and portfolio management. He has presented seminars for organisations such as SIAS, SPH and IRAS, commentated live market updates for 93.8FM, and authored investment articles for the Business Times newspaper. He graduated with a Bachelor of Commerce in Accounting & Finance from the University of Western Australia.

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