Bonds

The Credit Cheatsheet – Our favourite bond ideas in March

Our Credit Cheatsheet summarises the most important news in bond markets over the past weeks and some of our top bond picks! In this edition, we share some of our favourite bond ideas in March including several attractive short-tenor bonds, a near 6% bond, and an opportunity to invest in India.

Colin Low
Colin Low25 Mar 2024 1830 Views
The Credit Cheatsheet – Our favourite bond ideas in March

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Up to Date with Rates


  • In the March meeting, the Bank of Japan (“BOJ”) ended their negative rates policy, pivoting to a zero interest rates policy. Policymakers will be shifting the target rate from -0.10 - 0.00% to 0.00 - 0.10%. This will be accompanied by an end to yield curve control and the purchase of ETFs. With the pivot in policy direction, the Japanese Government Bond (“JGB”) yields may face the risk of sudden spikes. Acknowledging such risks, policymakers have promised to maintain its monthly JGB purchases at largely the same pace.

  • The Reserve Bank of Australia (“RBA”) kept its cash rate unchanged at 4.35% at the March meeting. This was largely in line with consensus expectations. Policymakers continue to stress that its highest priority is to return inflation to the target range. Relative to the prior meeting, policymakers have adopted a more neutral tone, suggesting improving confidence that CPI is heading in the right direction.

  • In the March meeting, the US Federal Reserve (“Fed”) made no changes to its monetary policy and maintained a target rate range at 5.25 - 5.50% as widely expected. Projected fed fund rates continue to signal three rate cuts this year. Beyond 2024, dot plots have scaled back on their dovish expectations of 100bps cuts (2025 and 2026) from December’s meeting to 75bps cuts (2025 and 2026). 

  • Across the past two weeks (since 8 March), the 2-year Singapore Overnight Rate Average-Overnight Index Swap (“SORA-OIS”) increased by 8 basis points to 3.133%, the 5-year SORA-OIS increased by 11 bps to 2.970% and the 10-year SORA-OIS increased by 12 bps to 2.965%.

  • Singapore treasury curve steepened slightly over the same period. Benchmark yields for the 6-month SGD T-bill rose by 3 basis points to 3.72%, the 5-year SGS rose by 5 basis points to 3.07%, while the 10-year SGS rose by 9 basis points to 3.15%. 

  • Since December’s Fed meeting, the US treasury curve has steepened as markets pushed back the expectations of rate cuts. Over the past three months, the 1-year US Treasury (“UST”) rose by 13 basis points to 4.97%. The 5-year UST rose by 28 basis points to 4.20%, while the 10-year UST rose by 33 basis points to 4.21%. 
 

 

 


Favourite Bond Investment Ideas


Attractive yield for shorter maturity - GUOLSP 3.400% 10Aug2025 Corp (SGD) and GUOLSP 3.290% 26Oct2026 Corp (SGD) 

We like GuocoLand’s 2025 and 2026 bonds as they offer attractive yields in the SGD bond universe with a maturity of less than three years. The increase in borrowings and finance costs have weighed on GuocoLand’s debt metrics but the overall credit profile remains healthy and decent. The group’s Singapore assets remain resilient and continue to be the dominant profit driver, anchoring earnings. Comparing GuocoLand’s issuances to that of other property developers, we find that yields are generally higher, likely due to a larger credit spread. However, with a decent credit profile, we think GuocoLand’s issuances can offer a nice yield pickup.

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Ride on the tailwinds of global energy transition - KITSP 4.110% 05May2027 Corp (SGD) 

Keppel Infrastructure Trust’s (“KIT”) 2027 bond is another insurance which offer investors decent yield and coupon in the short-duration SGD bond space. 2023 was a record year for KIT which saw strong growth in EBITDA. Earnings are firmly anchored by the energy transition segment, which is uplifted by structural tailwinds. The trust’s assets also tend to have dominant market positions and some monopolistic features, enabling them to enjoy pricing power. Overall, KIT’s credit profile remains resilient despite the prospect of higher-for-longer rates, helped by an improving balance sheet and minimal maturities in 2024 and 2025.

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The cloud of uncertainty is quickly dissolving for this near 6% bond - OLAMSP 4.000% 24Feb2026 Corp (SGD) 

Olam Group Limited (“Olam”) recently released an announcement indicating that no evidence was found in the investigation of the alleged fraud case. As the cloud of uncertainty clears, we see opportunities in Olam’s 2026 paper which offers attractive yield of near 6% - one of the highest yielding SGD note maturing in the next two years. This is backed by our previous positive view on the Group’s credit profile while good 2H23 earnings results further reaffirmed the Group’s improving earnings outlook. 

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Be spoilt for choices with high coupon rates - Standard Chartered 2025 and 2027 USD bonds

Standard Chartered plc (“StanChart”) offers a number of USD bonds. We like the bank’s senior unsecured bonds - STANLN 7.776% 16Nov2025 Corp (USD), STANLN 6.170% 09Jan2027 Corp (USD), and STANLN 6.187% 06Jul2027 Corp (USD) - for their attractive coupon and yield. Investors who prefer to trade with a smaller denomination (i.e. below USD 200,000) can also consider STANLN 4.300% 19Feb2027 Corp (USD), available on our Bond Express. StanChart remains well-capitalised, with key ratios having a strong buffer against regulatory minimums, and assets remain healthy. The bank’s operational performance continues to be resilient, with management guiding for high-single-digit income growth next year.

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Shriram Finance’s 2025 and 2027 bonds offer attractive yields of above 6% and provide investors an opportunity to tap into India’s growing credit market. Shriram Finance is primarily engaged in the provision of financial services with a fairly straightforward business model of providing loans and earning interest margins. The company’s operating performance continues to be robust, helped by strong net interest income in a backdrop of higher benchmark rates. The Company’s credit profile also remains healthy with key ratios above regulatory requirements, decent coverage and leverage ratios, as well as a decline in the non-performing loans. Most of the company’s loans are also collateralized. 

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Hot New Bond Issues


Table 1


Corporate Updates You Should Know


8 March – Sembcorp Industries (“Sembcorp”) announced that its subsidiary, PT Sembcorp Renewables Indonesia, has formed a joint venture with PT PLN Nusantara Renewables to build and develop a large-scale integrated project comprising 50MW of solar and 14MWh of battery energy storage system in Indonesia. This project will be Sembcorp’s first entry into utility-scale solar development in Indonesia, which possesses a large renewable energy potential.

11 March - Frasers Property ("FPL") has announced the redemption of SGD600mn FPLSP 4.980% Perpetual Corp (SGD) on its first call date, 11 April 2024.

15 March – Singapore Airlines (“SIA”) saw an improvement in operating figures for February 2024. The Group’s passenger capacity has increased by 20.7% YoY, while passenger traffic grew by 20.4% YoY. Overall, it carried a combined 3.06 million passengers in February, an increase of 28.2% YoY. February’s operating result was an extension of the strong performance seen from SIA’s 3Q23 results (for the quarter ended 31 December 2023). Given the strong operating results in the last two months, we expect a record profit for FY23 which should support the Group’s credit metrics.

The Group also issued a new USD 10-year senior unsecured bond, SIASP 5.250% 21Mar2034 Corp (USD), on 21 March. We think this new issue is fairly priced relative to SIA’s other outstanding USD bonds. Considering the lack of longer-tenor bonds within the airline industry, the newly issued bond may be an alternative for bond investors searching within this space. 

18 March – Singapore Post (“SingPost”) announced the completion of the group’s strategic review which was initiated in May last year. Management intends to carry out five strategic initiatives (below) over the next three years. Overall, we think these initiatives are a step in the right direction as segment like the post and parcel business faces a structural decline. That said, these plans take time to materialise and we think the potential for an earnings rebound remains limited in the meantime.

  1. Re-organization of the business segments to Singapore, Australia, and International to enhance flexibility and facilitate future developments (The current business segments are Post & Parcel, Logistics, Property and Others)
  2. Strategic management of capital, which includes the monetisation of non-core assets and a dividend payout targeting 30% - 50% of the underlying net profit
  3. The continued transformation of urban logistics and deliveries in Singapore market
  4. Scaling up the Australian business, which includes strengthening its market position, near-term partnerships, and exploring further M&A opportunities.
  5. Enhance the eCommerce supply chain network to better serve international customers through its fourth-party logistics platform and asset-light model
21 March – Oxley has announced that it does not intend to extend the expiration deadline or re-open the invitation regarding the exchange offer for its OHLSP 6.900% 08Jul2024 Corp (SGD). Details of the exchange offer announced on 11 March can be found here. We have recommended bondholders to hold their 2024 bonds to maturity and not participate in the exchange offer.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a position in STANLN 4.300% 19Feb2027 Corp (USD) and GUOLSP 3.290% 26Oct2026 Corp (SGD), and the analyst who produced this report holds a NIL position in the abovementioned securities.

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