6% Annual Yield

[EricDraven]

That's all true, but given the overall size and diversification of their portfolio (both STT & Temasek), any setback is unlikely to impact them much.

How likely is Temasek or any of its subsidiaries to default on its debt? If that day really come, it's probably the start of the end of the Singapore story anyway.

 

[SKenny]

That's all true, but given the overall size and diversification of their portfolio (both STT & Temasek), any setback is unlikely to impact them much.

How likely is Temasek or any of its subsidiaries to default on its debt? If that day really come, it's probably the start of the end of the Singapore story anyway.

The biggest issue I have with Temasek is its transparency, or more precisely the lack of.

We don't even know how much their senior management are paid despite the clear potential of conflict surrounding it!

I still believe that they are sound only because our govt is behind them.

 

[EricDraven]

The biggest issue I have with Temasek is its transparency, or more precisely the lack of.

We don't even know how much their senior management are paid despite the clear potential of conflict surrounding it!

I still believe that they are sound only because our govt is behind them.

Again, I agreed with u wrt the non-transparency issue. I'm just looking at this as a pure investment return of 5% indirectly backed by the Singapore govt, which to me, is as good as it can possibly get at this kind of risk profile. Contrast this with Hyflux 6% perps offering only 1% premium but perceived as a "Singapore" brand and offered for retail participation.

 

[OngHuatHuat]

Is there any reason why this bond yield is much higher than that of Temasek bond?

How about SGD quasi-sovereign bonds like the recently IPO'd ST Telemedia 5% perps? It's wholly-owned by Temasek and offers 5% vs parent at only 2.7% (Temasek's 5-yr bond launched last year). Not 6%, but good return at minimal risk?

 

[SKenny]

Again, I agreed with u wrt the non-transparency issue. I'm just looking at this as a pure investment return of 5% indirectly backed by the Singapore govt, which to me, is as good as it can possibly get at this kind of risk profile. Contrast this with Hyflux 6% perps offering only 1% premium but perceived as a "Singapore" brand and offered for retail participation.

STT is NOT indirectly backed by the govt. Neither is Olam. Temasek happens to own > 50% of them. Much of their assets are based oversea which make it a lower priority for the govt in case that a bail-out is required.

That is why you are getting 5% yield.

For a long time, many people believe that govt will not allow Hyflux to fail because of the importance of an alternative water supply is to Singapore.

 

[BBCWatcher]

That is why you are getting 5% yield.

Exactly. Even if you know nothing about the bond issuer and its quality, just look at the yield. That's roughly 300 basis points above a Singapore Savings Bond, so obviously there's risk.

 

[EricDraven]

STT is NOT indirectly backed by the govt. Neither is Olam. Temasek happens to own > 50% of them. Much of their assets are based oversea which make it a lower priority for the govt in case that a bail-out is required.

That is why you are getting 5% yield.

For a long time, many people believe that govt will not allow Hyflux to fail because of the importance of an alternative water supply is to Singapore.

STT is wholly-owned by Temasek. Technically, Temasek can allow its wholly-owned subsidiary to default but I can't imagine the repercussions of that nor the possibility of it happening. So I reckon the extra 2+% yield is pretty worth the risk premium.

 

[EricDraven]

Exactly. Even if you know nothing about the bond issuer and its quality, just look at the yield. That's roughly 300 basis points above a Singapore Savings Bond, so obviously there's risk.

Anything that is not technically risk-free like SGS or SSB obviously has risks and requires higher returns. I'm just saying I think a 5% perp issued by a wholly-owned subsidiary of Temasek seems to be good value vs the other SGD corporate bond yields I see out in the market.

 

[SKenny]

STT is wholly-owned by Temasek. Technically, Temasek can allow its wholly-owned subsidiary to default but I can't imagine the repercussions of that nor the possibility of it happening. So I reckon the extra 2+% yield is pretty worth the risk premium.

Another way of looking at this is to look at the bonds issued by Temasek.

1) Bonds issued and backed (guarantee) by Temasek - yield 2.75%

2) Astrea (also issued by Temasek but NOT back by them) - 4.35 to 6.75% depending on the class of bond.

There is a clear gap of at least 1.6% between them. Clearly there are different risks involved.

 

[tangent314]

If you are holding a large portfolio, it is only natural that some invements will do a lot better than average and some investments will do a lot worse than average. You cannot really cherry pick one or two investments that went back and claim that the holding company is doing badly.

Of course, internally if there are portfolio managers that are always picking bad investments, he or she would probably be in a bit of pressure.