Temasek Holdings has sold another US$1 billion in bonds, its fifth offering in as many months. Since October last year, Temasek has raised more than $4 billion through bond sales, including yesterday’s issue.

The latest 10-year offering will have a coupon rate of 3.265 per cent, which is lower than the roughly 4.3% yield in a similar offering last October. The bond is denominated in size of US$250,000.

Temasek has also doubled its global medium-term note programme so it now has the scope to issue US$10 billion (S$14.2 billion) in bonds, up from the previous limit of US$5 billion.

The reason given for the bond offering is to fund the ‘ordinary course of business’ of Temasek and its investment holding companies.

My wishlist: Temasek to issue S$ bonds to CPF board (instead of private investors) with the higher yield passing through to CPF members.

PIIGS – Portugal, Italy, Ireland, Greece and Spain are currently the five weakest of the Eurozone countries.

Their huge deficits has lead the financial markets to increasingly believe in recent days that one of them might default on its sovereign debt.

Their recently downgraded credit ratings not only makes it more expensive for them to borrow money, and also harder to find lenders.

Devaluation of currency is not an option unless they want to consider leaving the Eurozone. To prevent this from happening, some of the stronger countries might have to step in to bail out the weaker ones. This is provided (of course) that the stronger countries are not in trouble themselves.

Ultimately, governments will find that they cannot spend more then they earn forever. The biggest challenge is knowing when a crisis will erupt as such situations can run for longer than expected.

Dubai was quickly written off as a non-event. How will PIIGS play out?

The payout value of the various Minibond series was announced yesterday. Depending on which Minibond tranche you held, the percentage of recovery will range from 21.5% to 70.8%.

Tranche Series Percentage Recovery* (%)

Series 01 Tranche A (SGD Notes ) 21.5
Series 01 Tranche B (USD Notes) 24.0
Series 02 Tranche A (SGD Notes) 62.4
Series 02 Tranche B (USD Notes) 70.8
Series 03 Tranche A (SGD Notes) 55.9
Series 03 Tranche B (USD Notes) 64.0
Series 03 Tranche C (AUD Notes) 47.3
Series 05 (SGD Notes) 29.8
Series 06 (SGD Notes) 40.0
Series 07 (SGD Notes) 59.5
Series 08 (SGD Notes) 63.1
Series 09 (SGD Notes) 57.7
Series 10 (USD Notes) 62.4

I had expected about 50-60% recovery values for the different series and the majority indeed does fall into that range. Series 1 and 5 Minibond holders are the worst off in the amount they are getting. The series with the most number of investors are series 2, 3 and 5.

Payments to the noteholders will be made on 12 February 2010. The actual date that you receive your payment will depend on whether you hold a direct account with CDP or whether you hold the Notes through a nominee account.

More news on this:

HSBC Minibond Announcements

MAS Welcomes Announcement of Distribution of the Recovery Values of the Minibond Notes

Payout for Minibond Holders From 12 Feb (CNA)

This week, the London Stock Exchange (LSE) launched a new bond trading platform that will make bond investing more accessible and affordable for retail investors.

For the launch of the bond trading platform, 49 gilts and ten corporate bonds by blue chip companies including Royal Bank of Scotland, Tesco, GlaxoSmithKline, BT, National Grid, Morgan Stanley and GE Capital have been made available for trading.

The trading platform allows investors to see prices directly and trade in increments as low as £1,000 for corporate bonds and £1 for gilts. Evolution Securities and Shore Capital Stockbrokers will help act as market makers on the platform.

In Singapore, access to the corporate bond market is usually available only to institutional investors or individual investors who are able to commit at least $200,000 on a single bond purchase.

There are a few statutory boards bonds (in size of $10k) which are listed on the SGX but liquidity for them is usually quite poor.

With fixed deposit interest rates at historical lows, there exists a gap in our market for low risk products which can give a decent yield of 4-5%.

Having a similar bond platform in Singapore would certainly benefit the retail investors here.

Due to recent strong growth in the Schroder Alternative Solutions (AS) Commodity Fund, with its assets more than tripling since the start of 2009, it is of the Manager’s view that the fund has reached the limit at which it may not be effectively managed given the current capacity of commodity futures markets.

Hence, to better manage the fund, Schroder Investment Management has decided to cease accepting subscriptions and switches-in of the Schroder Alternative Solutions (AS) Commodity Fund with effect from 27th February 2010.

This will affect all share classes of the Fund (the “Share Classes”).

The reason for the above closure is that the fund is now managing in excess of 10 billion US dollars across the range of products managed by the team (Commodities, Agriculture and Gold and Metals). This action is necessary to ensure that the Fund’s ability to achieve its performance objectives is not compromised by its size.

I view this move by the fund manager as positive. It is always tempting to allow a fund to grow as big as possible. After all, the manager will earn more in management fees.

However, a fund (depends on fund type also) that is too big might have problems in achieving good returns. Putting a cap on the fund size in order not to compromise the returns for investors speaks well of the manager.