General S-REITs Discussion Thread

[d5dude]

There is this thing called hedging to address forex woes.

MUFG had no problems with the 30% USDJPY appreciation from 2022.

Sell-side exists for a reason.

Hedging is essentially the same thing as borrowing in dollars, only difference is you pay short term funding cost to hedge while issuing AT1 enables them to lock in long term funding cost.

In any case this shouldnt have anything to do with JGBs yields since they are not borrowing in Yen, they would have issued Yen denominated debt if they held the view that JGB yields are going to rise soon.

 

[stanlawj]

Hedging is essentially the same thing as borrowing in dollars, only difference is you pay short term funding cost to hedge while issuing AT1 enables them to lock in long term funding cost.

In any case this shouldnt have anything to do with JGBs yields since they are not borrowing in Yen, they would have issued Yen denominated debt if they held the view that JGB yields are going to rise soon.

I quote a US bank expert:
Bank's equity drops when interest rate rises.


MUFG needs to sell AT1 bonds
When BoJ exits YCC, Japanese interest rates will eventually rise to a new higher norm (as can be seen from JGB bond yields) so MUFG's assets (JPY loans earning low interest for MUFG) will decrease in value. So it needs to shore up its balance sheet now before the interest rates start rising drastically.

USD$ instead of JPY denominated bonds
When BoJ exits YCC, USDJPY can drop by a lot as interest rates differential reverse. i.e. MUFG may be betting on USD to top out soon and then weaken relative to JPY down the road, so it will be easier for MUFG to redeem or pay the recurring interest on the AT1 bonds.

So my conclusion could still be right, that MUFG's USD$ AT1 bond issuance may indeed be a consequence of a bet on permanent rise in JGB yields.

 

[limster]

I quote a US bank expert:
Bank's equity drops when interest rate rises.

I am more interested in whether Bank's earnings rise when interest rates rise, because Banks pay dividends from their earnings, not their equity.

 

[churnmaster]

I quote a US bank expert:
Bank's equity drops when interest rate rises.


MUFG needs to sell AT1 bonds
When BoJ exits YCC, Japanese interest rates will eventually rise to a new higher norm (as can be seen from JGB bond yields) so MUFG's assets (JPY loans earning low interest for MUFG) will decrease in value. So it needs to shore up its balance sheet now before the interest rates start rising drastically.

USD$ instead of JPY denominated bonds
When BoJ exits YCC, USDJPY can drop by a lot as interest rates differential reverse. i.e. MUFG may be betting on USD to top out soon and then weaken relative to JPY down the road, so it will be easier for MUFG to redeem or pay the recurring interest on the AT1 bonds.

So my conclusion could still be right, that MUFG's USD$ AT1 bond issuance may indeed be a consequence of a bet on permanent rise in JGB yields.

I think it’s the possible weakening of USDJPY in the near future (12-18 months), which they are trying to capitalize on.

 

[churnmaster]

I am more interested in whether Bank's earnings rise when interest rates rise, because Banks pay dividends from their earnings, not their equity.

How are your European bank stocks doing ?

 

[limster]

How are your European bank stocks doing ?

Based on the charts, they are all doing well in the past year, SAN, ING, BBVA, HSBC.
The only one that is flatlining is LLOY (went briefly up to 50p but has retreated). Earnings and dividends are still good so happy to continue holding and accumulating.

 

[d5dude]

I quote a US bank expert:
Bank's equity drops when interest rate rises.


MUFG needs to sell AT1 bonds
When BoJ exits YCC, Japanese interest rates will eventually rise to a new higher norm (as can be seen from JGB bond yields) so MUFG's assets (JPY loans earning low interest for MUFG) will decrease in value. So it needs to shore up its balance sheet now before the interest rates start rising drastically.

USD$ instead of JPY denominated bonds
When BoJ exits YCC, USDJPY can drop by a lot as interest rates differential reverse. i.e. MUFG may be betting on USD to top out soon and then weaken relative to JPY down the road, so it will be easier for MUFG to redeem or pay the recurring interest on the AT1 bonds.

So my conclusion could still be right, that MUFG's USD$ AT1 bond issuance may indeed be a consequence of a bet on permanent rise in JGB yields.

Huh? Charles Schwab and other US banks got hit because they have an asset/loan duration mismatch, MUFG doesnt have this problem, their portfolio of JGBs has a weighted average maturity of <2 years.

Also banks dun generally place bets on FX, they make money from the loan/deposit spread, the reason for selling AT1s (according to the Bloomberg credit analysts) is clear:

But they may consider selling such debt in US dollars to help mitigate foreign-currency risk in their capital ratios, given they can get squeezed when the yen depreciates, Bloomberg Intelligence credit analysts including Pri De Silva wrote in September.

It has nothing to do with gambling on the direction of the Yen or USD. They have assets (loans) in dollars so they need dollars to shore up their CET1.

Anyway MUFG doesnt have a crystal ball, they are just like everyone else in the market, clueless about whats coming next.

 

[stanlawj]

Huh? Charles Schwab and other US banks got hit because they have an asset/loan duration mismatch, MUFG doesnt have this problem, their portfolio of JGBs has a weighted average maturity of <2 years.

Also banks dun generally place bets on FX, they make money from the loan/deposit spread, the reason for selling AT1s (according to the Bloomberg credit analysts) is clear:

It has nothing to do with gambling on the direction of the Yen or USD. They have assets (loans) in dollars so they need dollars to shore up their CET1.

It's nice to have an expert like you to clear up the confusion. The probability of you being right is 99%, and the fact that the USD is needed more than JPY by the bank makes a lot of sense. Simplest explanation is always the best explanation.
For now, the JPY will continue to devalue vs the USD, I have yet to see any evidence of this trend reversing, judging from BoJ talk.

 

[d5dude]

It's nice to have an expert like you to clear up the confusion. The probability of you being right is 99%, and the fact that the USD is needed more than JPY by the bank makes a lot of sense. Simplest explanation is always the best explanation.
For now, the JPY will continue to devalue vs the USD, I have yet to see any evidence of this trend reversing, judging from BoJ talk.

Erm I'm not an expert man. I'm just reading off MUFG's balance sheet, which everyone can easily access thanks to the interwebs, the Business Times article is also quite clear about the purpose of the dollar AT1 issuance.

I have no idea where the dollar or Yen is headed, and I think nobody does...

 

[revhappy]

REITs have been butchered today. Josh Tan sold his HDB and bought REITs. I knew he was doing a big mistake. But didn't know he will get hit so big, so soon.

 

[zeroX26]

REITs have been butchered today. Josh Tan sold his HDB and bought REITs. I knew he was doing a big mistake. But didn't know he will get hit so big, so soon.

Then he stay where now siah..

 

[revhappy]

Then he stay where now siah..

He stay in condo. He was renting out his HDB:

 

[apriliasiao]

REITs have been butchered today. Josh Tan sold his HDB and bought REITs. I knew he was doing a big mistake. But didn't know he will get hit so big, so soon.

Certainly a mistake if he is trading in and out from his positions, else once this cycle turnaround and one can only admire his guts coz he huat big big. Who dares win!

 

[DevilPlate]

He stay in condo. He was renting out his HDB:

His backside itchy go sell away his hdb cashcow.

Now it is impossible to hold on to hdb if one upgrade to condo liao unless pay hefty absd.

 

[revhappy]

 

[TehSi99]

Looks any wind blow grass move situation, the reits will be sell down regardless.

 

[DriftKing]

With a majority of the portfolio in REIT now, kinda got stuck with today's slump, any suggestions should I hodl or cash out and put into interest deposit?

 

[Iyarash11]

cry no eye shiat

 

[homer123]

From losing 1 year of dividend to now 3+ years of dividend on my S-Reit within 2023

 

[sohguanh]

With a majority of the portfolio in REIT now, kinda got stuck with today's slump, any suggestions should I hodl or cash out and put into interest deposit?

I am curious about your investment strategy so means a while ago when you buy REIT you all in or majority of monies is in it? Or you already diversify? If you already diversify then your REIT red color ok becuz your other investment instrument I presume is bank FD, T-Bill is green color correct? Furthermore REIT has mandate to pay out 90% of their earnings so die die they need give you dividends unless they close shop aka delisted from SGX.

One main reason why ppl lose monies in stock (I also last time) is to sell when it is low and buy when it is high. This is quite true becuz in a bull market cheong cheong cheong sure buy which depend on timing can be late liao. Now after a hiatus from SGX, I am now back in and am smarter now but the monies I put in stock is not all in (always my advice)