Astrea 8 bonds

[bruiser69]

if the USD had actually gone up in the last few days, i bet no one will be talking about this.
Its fixed at 1.35 like it or not and its normal business practice to hedge for something as 'large' as this (US$200m).

1.3424 at the moment. Its a non issue.

Pruss the 6.35% interest rate for 6 yrs or so would be able to cover the exchange loss niah.

 

[sgdividends]

Is the class 2 USD coupons automatically converted by HSBC and deposited as SGD into our linked bank account ?

 

[sky1978]

Upon redemption, we cannot choose to receive it in USD right? Sian

This question is in their FAQ no 19.
https://www.azalea.com.sg/a8/faqs

19. Do I receive interest and principal payments for the Class A-2 Bonds in US$ or S$?

Although interest and principal payments on the US$ denominated Class A-2 Bonds are made by the Issuer in US$, if you are a direct securities account holder of CDP who has applied for CDP’s Direct Crediting Service (allowing CDP to credit cash distributions into your designated bank account), you will receive these payments in S$ by default (converted by CDP at such exchange rate provided by CDP’s partner bank).

You may opt-out from receiving payments in S$ via CDP Internet. Upon opting out, your foreign currency cash distribution will not be converted. It will remain in your cash balance with CDP. Please note there is telegraphic transfer fee imposed by CDP in addition to applicable receiving bank charges per withdrawal request.

For more information, refer to the Currency Conversion Service (CCY) section under CDP’s FAQ page at https://www.sgx.com/cdpfaqs.

 

[bruiser69]

Which huan lei?

i) A1 only
ii) A2 only
iii) A1 & A2 combined



Pick your choice of poison

 

[wutawa]

this is wat i meant. make a decision based on the returns.

but sorry, this is not all to consider. you have to consider the capital loss if the bonds were to be redeemed at usd = 1.25

What is the rate when the prev bonds were matured?

 

[dork32]

What is the rate when the prev bonds were matured?

pass performance of the usd is not an indication of how it will perform in the future.

 

[BBCWatcher]

For reference/as a reminder (and to help inform any comparisons with Astrea 8 Class A-2), 5 year U.S. Treasuries are currently yielding about 4.10%. You can buy them with U.S. dollars, and you receive U.S. dollars back. No forced currency conversions, and no CDP/HSBC currency exchange markups (unless that's what you choose to use). You can also buy TIPS (Treasury Inflation Protected Securities) if you want real returns (inflation-indexed). U.S. Treasuries are also much more liquid (have a MUCH bigger secondary market) than Astrea 8 securities. The 5 year TIPS is at about 1.95% right now, and I think that's fairly spectacular for a conservative investor that wants an assured, real U.S. dollar outcome 5 years from now.

Of course if you want U.S. Treasuries that mature at about the same time as the Astrea 8 Class A-2 securities are expected to be called (6 years), you can do that. Just pick the U.S. Treasury(ies) with the maturity date(s) you want. Find the CUSIP number(s) for the one(s) you want, and that's how you can place your order. There are no allocation-related risks either. You can buy as much as you want at the market price, probably up into the billions if you'd like.

The major brokers (such as Interactive Brokers) also provide access to various individual corporate bonds across yield, maturity, and risk profiles. These bonds have much less trading volume, but most of them will have more trading volume than Astrea 8 securities will have. However, I would steer clear of U.S. tax advantaged municipal bonds unless you're a U.S. person. That's because those particular bonds are U.S. tax free, and the yields reflect that fact for U.S. investors. If you're a resident of Singapore who's not a U.S. person then that tax advantage is lost on you, so it's pointless to settle for a lower yield. Stick to U.S. taxable bonds (which are tax free for you).

 

[sohguanh]

What is the rate when the prev bonds were matured?

Currency exchange aka forex is like stock will go up and down. For SGD it is a strong currency. For MYR forever weak at least in my lifetime. With this in mind make your bet. All I know is when I was young USD 1 can get SGD 1.8+. 1 SGD can get MYR 2+. Now 2024 see for yourself.

There are investment that are purely playing a pair of currency so the more it fluctuate the more profits and losses you get.

 

[BBCWatcher]

Currency exchange aka forex is like stock will go up and down. For SGD it is a strong currency.

I prefer to characterize the Singapore dollar as a quality currency. "Strong" implies a particular exchange rate, or exchange rate trajectory. That's certainly not a given. In the past the Singapore dollar has fallen significantly in value relative to major currencies. Of course that bit of history could repeat itself.

In my view it's unwise to peg most or all of your financial future to any single currency, even if it's among the world's quality currencies. Inflation and devaluations are possible, of course.

Also, the exchange rate on its own, in isolation, isn't the whole story. As long as you're compensated (or more than compensated) for any losses due to exchange rate movements you can still come out ahead. Let's suppose you're comparing 12 month T-bills in two currencies: Currency A and Currency B. And your lifestyle is chiefly based in Currency B, let's assume. Here's what happens in this example (net figures, after costs):

Currency A: 5.0% interest rate, but reduced to 3.0% because of an exchange rate loss
Currency B: 2.5% interest rate (and of course 0% exchange rate loss)

Which T-bill is better? Of course it's the foreign currency T-bill in this example. The higher interest rate more than compensates you for the loss due to exchange rate movement. (And we're assuming here the risk profiles for these T-bills are comparable.)

For MYR forever weak at least in my lifetime.

Possibly, but it's also probably true that ringgit interest rates, bond yields, etc. have been higher on average than rates/yields on comparable Singapore dollar vehicles. Obviously the Malaysian ringgit has lost value relative to the Singapore dollar since the currencies separated (then on a 1:1 exchange basis). Probably the higher average ringgit interest rates/bond yields have not been enough to compensate for the exchange rate loss relative to the Singapore dollar, although it's partial compensation.

"Be careful what you wish for," though, if you're wishing for a strong Singapore dollar. A strong domestic currency hurts exports, and it makes Singapore comparatively less attractive as a base of operations for global multinational companies. It means Singapore is comparatively less attractive as an international convention site since it's priced out of competition against Madrid, Tokyo, Seoul, etc. Singapore is a small, open economy heavily reliant on trade. If the currency is too strong then it's harder for Singapore to compete internationally.

 

[BrandonnC]

The current FX rate is 1.35.
For the exchange rate to drop to 1.28 in 6 years, (simplistically) either Spore is doing terribly well or US is doing very badly. My bet for such a scenario is unlikely, especially if the more likely next president will be Trump, who will 'make America great again'.
Despite the above, even at 1.28, the returns are still very decent.

 

[BBCWatcher]

The current FX rate is 1.35.
For the exchange rate to drop to 1.28 in 6 years, (simplistically) either Spore is doing terribly well or US is doing very badly....

No, it doesn't mean that. Even simplistically.

Just take a look at the 5 year USD/SGD chart, courtesy Yahoo! Finance in this case. Click/tap on the 5Y marker if the 5 year view doesn't come up right away. Astrea 8 Class A-2 is likely to be called at 6 years, although it could run longer. So a 5 year exchange rate chart is pretty relevant for these purposes. As you can see the USD/SGD exchange rate has had some decent variability over that half decade. More than a S$0.07 swing. I see S$1.45+ and ~S$1.31 on this chart — about a S$0.14 swing, even zoomed way out to the 5 year view.

Which doesn't mean Singapore or the U.S. is doing "terribly well" or "very badly." Obviously the U.S. economy has done well over the past half decade (and longer), and Singapore's has done pretty well, too.

 

[Garlic & Butter]

This question is in their FAQ no 19.
https://www.azalea.com.sg/a8/faqs

19. Do I receive interest and principal payments for the Class A-2 Bonds in US$ or S$?

Although interest and principal payments on the US$ denominated Class A-2 Bonds are made by the Issuer in US$, if you are a direct securities account holder of CDP who has applied for CDP’s Direct Crediting Service (allowing CDP to credit cash distributions into your designated bank account), you will receive these payments in S$ by default (converted by CDP at such exchange rate provided by CDP’s partner bank).

You may opt-out from receiving payments in S$ via CDP Internet. Upon opting out, your foreign currency cash distribution will not be converted. It will remain in your cash balance with CDP. Please note there is telegraphic transfer fee imposed by CDP in addition to applicable receiving bank charges per withdrawal request.

For more information, refer to the Currency Conversion Service (CCY) section under CDP’s FAQ page at https://www.sgx.com/cdpfaqs.

The breakeven point may be quite high to avoid the CCY spread.

If you own US$65,000 of A2, you get US$2063 per semi annual. If HSBC charge 1% spread, it will cost ~S$28.
If TT out to USD account, it will cost up to S$25 ($15+ $10 incoming TT fee)

side note, will transferring out to SCB be better? Just a one-time fee of $10.90 x2

 

[sky1978]

The breakeven point may be quite high to avoid the CCY spread.

If you own US$65,000 of A2, you get US$2063 per semi annual. If HSBC charge 1% spread, it will cost ~S$28.
If TT out to USD account, it will cost up to S$25 ($15+ $10 incoming TT fee)

side note, will transferring out to SCB be better? Just a one-time fee of $10.90 x2

I don't see that level of spread (1%) for my latest USD dividend, which CDP converted. I pulled the Google FX chart and took the rates 2 to 3 days before the actual date when the SGD was credited to my account; the pips difference was around 10 to 20. For example, the CDP statement shows 1.3445, and the spot rate 2 and 3 days before was 1.3453/1.3459, respectively.

I noticed that some foreign currency dividends are not converted by the CDP but by the company/issuer. So, the rates might have been fixed long ago under those scenarios.

Even for the current 1.35 rate, I don't see a problem with that. The offer was launched on 11 July. Google FX chart shows that the rate was 1.3506 on 9th July and 1.3487 on 10th July. They will have fixed the rate just before the launch, and from the 1-month chart, it was above 1.35 for the last 20 days. It is just bad luck that the rate now is 1.3422.

The $10, I suppose, is your incoming TT fee. I am unsure if that $15 covers CDP's TT fees because it says $15 on top of applicable bank charges for every TT transaction; there can be a lot of fees along the way for each TT transfer. There should be another set of outgoing fees unless the transfer is within the same bank and they do a book transfer. But that also does not guarantee they won't try to make a profit out of that.
https://www.sgx.com/securities/retail-investor/cdp-faqs

 

[DevilPlate]

Pressed both.

 

[wutawa]

The breakeven point may be quite high to avoid the CCY spread.

If you own US$65,000 of A2, you get US$2063 per semi annual. If HSBC charge 1% spread, it will cost ~S$28.
If TT out to USD account, it will cost up to S$25 ($15+ $10 incoming TT fee)

side note, will transferring out to SCB be better? Just a one-time fee of $10.90 x2

u dont have ccy?
scb livefx comes with 4 tiers: green, blue, silver, gold

 

[bruiser69]

1 more day to go before closing

 

[chiokcc]

If apply A-1 only, need to pay $2 fee....

But if apply both A-1 and A-2, is need to pay $2 or $4 fee???

 

[Some-one]

If apply A-1 only, need to pay $2 fee....

But if apply both A-1 and A-2, is need to pay $2 or $4 fee???

$2 for each transaction so total $4. Dump $100k on both.....huat ah!!

 

[wei6464]

Is the bond risky? As in might lose capital?

 

[sglandscape]

Is the bond risky? As in might lose capital?

Any bond have chance will lose capital.