Tuesday, December 18, 2012

Newbie's bond portfolio - Trade #1

My first trade for the New Portfolio was conducted today. I bought SGD250k notional of the Global Logistics Properties 5.5% SGD Perpetual.

At a client price of 104.38, it works out to:
YTM = 5.23%
YTC (first call date 7th April 2017) = 4.37%

I will be using my SGD230k cash injected to fund the purchase and the remaining will be funded using SGD loan drawdown.

Assuming this bond is fully supported by SGD loans up till the approved lending ratio, the projected Net leveraged yields are:
Leveraged YTM = 13.91%
Leveraged YTC = 11.04%

Rationale for purchase:
Having injected SGD and USD into the portfolio, I needed a relatively high yield and investment grade security to utilise the SGD.
This SGD perpetual bond pays 5.5% fixed till 2017, afterwhich it resets to a floating formula (5Y SOR + 4.2%). This gives me inflation/rate rise protection. In addition, there is a 1% coupon stepup in 2022 if the security has not been called back by GLP.
GLP is largely owned by entities that are wholly owned by the Singapore Government. Further, GLP has a huge Shareholder Equity base which will act as the first loss buffer in the event of liquidation. I am very comfortable to park my SGD into this security.


Chong Hoe said...

Hi, very interested to follow wat you are doing. may I know where can I get the sgd loan for bond purchasing? What is the maximum margin? How much Babi charge for interest? Thank youb

newbie said...

Chong hoe, you can try either standchart main branch or Interactive Brokers to request for bond financing. These are entry level platforms.

If you have more than $1 million to invest, try approach private banks where they can provide more competitive terms.

Anonymous said...

Hi whats the min. amount for investment for such financial product in this case the GLP perceptual bonds?

newbie said...

For otc she bonds, the minimum is typically minimum sgd250k