Jumping on the bandwagon - otherwise known as my 2 cents worth on the Temasek Bonds

A lot of bloggers have opined on this. The roll so far:

financialhorse
investmentmoats
singularitytruth
investsingaporebonds
fifthperson
thesleepydevil
mysweetretirement

I won't go into details about the bonds. If you have to pick a couple from the list above to read, go with FinancialHorse and Investmentmoats for their detailed explanation.

Here are some thoughts on the Temasek Bonds, from my personal perspective.

Here's a snapshot of the current levels of some stock indices, vs their 52 week highs. Some markets have entered a bear market (Hong Kong, China) or are pretty close (Singapore).

If you are familiar with the Singapore Savings Bonds, you will also note that the yields have been rising steadily this year.

Here is a list of the average interest rates for the Nov 2017 to Nov 2018 issues. The average interest rates are based on the assumption that you hold the bonds to year 5. The rates have risen from 1.56% to 2.22%, an increase of 0.66%.

Assuming the same rate of increase continues for 1 more year, the 5 year average rate for the Nov 2019 issue could be 2.88%, beating the 2.7% rate of the Temasek bond.

Given that the bear has arrived for some markets, it makes sense to start hunting for bargains. This means I should keep my warchest in liquid assets that will keep its value until I need it.

While I am not a prognosticator of market direction, I will go out on a limb and say that we are probably in a rising interest rate environment.

When interest rate rise, bond prices fall. So there is a chance that the price of Temasek bonds may fall, if you try to sell them at a later time. Also, the market for retail bonds are supposed to be terribly illiquid, so you may not get a good price if you have to sell.

So I won't be subscribing for these bonds, since opportunities are appearing in the equities markets.

None of the above should be construed as investment advice. Do your own due diligence