The Credit Cheatsheet – No better deal than this Astrea USD paper

Our Credit Cheatsheet summarises the most important news in bond markets over the past weeks and some of our top picks! Most central banks are now keeping a close watch on the evolving trade policies, with the uncertainty posing significant risks to most economies. Meanwhile, Astrea VI Class A-2 USD paper has been fully reserved and offers a highly attractive ~5.1% to call in ~1 year.

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Published on 23 Mar 2025
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Up to Date with Rates

  • In the March meeting, the European Central Bank (“ECB”) announced the decision to lower the three benchmark rates by 25 basis points, with the key deposit facility rate down from 2.75% to 2.50%. ECB’s President, Christine Lagarde, highlighted that disinflation has progressed well while the monetary policy has been meaningfully less restrictive with previous cuts. On the other hand, the ECB acknowledges the uncertainty over trade policies and will continue to follow a data-dependent approach for the upcoming decisions. 

  • The Bank of Japan (“BoJ”) kept the key policy rate at 0.5% in the March meeting. The unanimous decision by the board had been expected by the markets. The meeting statement reflects a moderate economic recovery, despite some areas of persistent weakness. Particularly, the board expressed concerns about "high uncertainties" affecting Japan's economic activities and pricing, regarding trade dynamics and domestic wage-setting practices.

  • The Federal Reserve decided to leave the Federal Funds target range unchanged in the March meeting, with the rates kept between 4.25% to 4.50%. The Federal Open Meeting Committee noted that inflation remains somewhat elevated, whereas the uncertainty surrounding the economic outlook has increased recently. Meanwhile, the Fed has opted to slow the pace of decline in its securities holdings starting in April, reducing the monthly redemption cap on Treasury securities from USD 25b to USD 5b. 

    The Fed remains committed to achieving maximum employment and returning inflation to the targeted 2%. Policymakers still project two potential rate cuts in 2025, despite revising economic growth projections downward and increasing inflation forecasts in this meeting. The decision reflects a cautious approach amid concerns about the impact of tariffs on the economy and inflation.

  • In the March meeting, the Bank of England (“BoE”) maintained the policy bank rate at 4.5% in a majority 8-1 vote, reflecting a strong consensus among the members. The BoE highlighted a spike in inflation, with CPI inflation rising to 3.0% YoY in January, up from 2.5% in December. It also expects CPI inflation to rise further in the near term, to possibly 3.75% in 3Q25. The BoE emphasized a "gradual and careful approach" to future rate adjustments, as it continues to monitor changes in both the UK and global economy. 

  • For the period from 21 February to 21 March, the 2-year Singapore Overnight Rate Average-Overnight Index Swap (“SORA-OIS”) decreased by 29 basis points to 2.2150%, the 5-year SORA-OIS decreased by 31 bps to 2.2625% and the 10-year SORA-OIS decreased by 27 bps to 2.4154%. 

  • Over the same period, yields for the 6-month SGD T-bills fell to 2.50% while the 1-year SGD T-bills dipped by 32 basis points to 2.52%. The 5-year Singapore Government Securities decreased by 24 basis points to 2.50%, while the 10-year Singapore Government Securities decreased by 21 basis points to 2.66%. In the recent 6-month T-bills auctions, the bid-to-cover ratio were at a high, consistently above 2.50x levels over the past few auctions. We believe this helped push the cut-off yields down in the recent period, which saw the latest cut-off yield falling to 2.56% in the latest 13 March auction. 

 

 

 



Favourite Bond Investment Ideas

HSBC 7.390% 03Nov2028 Corp (USD) and HSBC 5.546% 04Mar2030 Corp (USD) – Stellar performance for yet another year

HSBC Holdings plc (“HSBC”) continues to report another year of record profits, particularly for its profit before taxes hitting a record high. For HSBC, the banking net interest income (“NII”) remains a significant contributor to income, albeit facing downward pressures on interest rates across 2024. We believe the recent strategic moves to restructure and re-organise the Group will ultimately be beneficial for HSBC, or in its words making HSBC “simpler, more agile and focused, all targeted to drive continued growth”.

Looking ahead, while the likelihood of another record year might be diminishing, HSBC is likely to maintain the strong profitability it has seen since the rate hikes. We favour various HSBC USD bonds, especially the shorter-dated 2028 and 2020 senior unsecured options still offering close to 5% yields. These would be great options for conservative investors seeking relatively safer papers.

STANLN 4.300% 19Feb2027 Corp (USD) and STANLN 3.265% 18Feb2036 Corp (USD) – Profitability on good progress

Standard Chartered (“StanChart”) saw a solid year for FY24, reporting growth in operating income (+13% YoY) and profit before tax (+20% YoY). Growth in non-NII was a major reason for the performance, accounting for almost half of FY24 operating income and climbing from USD 7.8b (FY23) to USD 9.3b (FY24). We expect StanChart’s outlook to stay positive in the period ahead with operating income to continue growing in FY25 and beyond. Non-NII is likely to remain as StanChart’s primary growth driver, while NII sees resiliency in the medium term. 

We prefer the StanChart’s USD Tier 2 subordinated bonds – one of a shorter duration available on Bond Express, and another with a good yield pick-up and slightly longer tenor. Both would be great for investors depending on their investment horizon.


ASTLC 3.250% 18Mar2031 Corp (USD) - Class A-2 and ASTLC 5.35% 27May2032 Corp (USD) - Class A-2 – You can’t get a better deal than this

Astrea’s VI and Astrea 7 Class A-2 bonds offer attractive yields of ~5.1% and ~5.2% respectively at respective credit ratings of ‘A+sf’ and ‘Asf’. In the recent Astrea VI distribution report by Azalea (released 18 Mar ‘25), the management has highlighted that Class A bonds are now fully reserved as of the report, 12 months ahead of the intended schedule. 

This means that we are expecting a call for the Astrea VI Class A-2 bonds – offering a sweet yield to call of ~5.1% at just below 1 year left (to call). We think it would be possible for the credit rating on this paper to be upgraded upon the following review by Fitch, matching Astrea VI Class A-1 rating of ‘AA-sf’. This also represents a significant yield pick-up against the US Treasuries while offering such a high credit rating, with almost a 100 bps pick-up against the 1y-tenor UST.


OLAMSP 4.000% 24Feb2026 Corp (SGD) – Diamonds are always made in the rough

FY24 was a pretty tough year for Olam Group Limited (“Olam”) as it saw a -69% YoY decline in profit after taxes and minority interests (“PATMI”). Despite seeing higher revenue and EBIT for the year (+16% and +9% YoY respectively), Olam was affected by a surge in net finance costs and one-off exceptional losses across the year. That being said, underlying business operations remain strong for ofi and Olam Agri, as seen from the growing revenue and EBIT despite the tough operating conditions for commodities. 

Just recently, Olam announced the proposed sale of Olam Agri stakes to Saudi Agricultural and Livestock Investment Company, involving the sale of the remaining 64.57% stake in Olam Agri. The sale is expected to raise estimated total gross cash proceeds of SGD 3.4b, which is likely to be used for debt repayment and a potential special dividend. 

Olam’s 4% fixed rate maturing in 2026 still stands pretty attractive in our view, with the issuer’s credit profile staying stable. With a yield to maturity above 4%, it remains one of the higher-yielding short-term SGD bonds. At the same time, we do not expect any impact coming from the sale of Olam Agri on the Olam 2026 notes. If anything, we expect the completion of the sale to provide additional liquidity towards the redemption of the paper. 


Hot New Issues

Table 1
Covered new issuances over the past weeks

Issue

Issuer

Issuance Date

New Issue View

LREIT 4.750% Perpetual Corp (SGD)

Lendlease Global Commercial REIT

28 Feb 2025

Lendlease Global Commercial REIT announces SGD PerpNC3 subordinated bond at 5.00% IPG

EREIT 4.050% 27Feb2030 Corp (SGD)

ESR-REIT

27 Feb 2025

ESR-REIT announces SGD 5-year senior unsecured bonds at an IPG of 4.25%

EQIX 3.500% 15Mar2030 Corp (SGD)

Equinix Asia Financing Corporation Pte. Ltd.

13 Mar 2025

Equinix announces SGD 5-year green bonds at an IPG of 3.75%

AAREIT 4.700% Perpetual Corp (SGD)

AIMS APAC REIT

18 Mar 2025

AIMS APAC REIT announces SGD NC5 perpetuals at an IPG of 5.00%

EREIT 5.750% Perpetual Corp (SGD)

ESR-REIT

20 Mar 2025

ESR-REIT announces SGD NC5 perpetuals at an IPG of 6.00%

HSBC 5.000% Perpetual Corp (SGD)

HSBC Holdings PLC

24 Mar 2025

HSBC announces SGD PerpNC5.5 Additional Tier 1 subordinated notes at IPG of 5.25%

SUNSP 3.400% 27Mar2031 Corp (SGD)

Suntec REIT

27 Mar 2025

Suntec REIT announces SGD 6-year senior unsecured bonds at an FPG of 3.40%

Sources: Bondsupermart, iFAST Compilations.



Corporate Updates You Should Know

  • 24 February – Olam Group Limited (“Olam”) announced the proposed sale of the remaining 64.57% stake in Olam Agri Holdings (“Olam Agri”) to Saudi Agriculture & Livestock Investment Company (“SALIC”). The proposed sale will be exercised through two tranches – with Tranche 1 being the sale of 44.58% stake in Olam Agri for approximately SGD 2.35b. SALIC will hold a controlling 80.01% stake in Olam Agri upon the completion of Trance 1.

    Subsequently, Olam will have a put option to sell the remaining 19.99% stake to SALC as part of Tranche 2. This would be exercisable on the third anniversary of the completion of the sale of Tranche 1. Correspondingly, SALIC will have a call option to buy the 19.99% stake in Olam Agri on or before the third anniversary of the completion of the sale of Tranche 1.

  • 28 February – Hotel Properties Limited (“HPL”) announced an update regarding the charges against HPL’s Managing Director, Mr. Ong Beng Seng. HPL’s Board reflected that they have been made aware of Mr. Ong’s intention to plead guilty to one of the charges. Subsequently, HPL indicated that its Nominating Committee maintains the view that Mr. Ong continues to be suitable to carry out his duties and responsibilities as Managing Director.

  • 12 March – City Developments Limited (“CDL”) announced that the court proceedings against various directors within CDL have been settled and will be discontinued. Mr. Kwek Leng Beng will continue in his role as Executive Chairman, while Mr. Sherman Kwek will continue in his role as the Group Chief Executive Officer. All existing directors will remain on the Board. 

    Additionally, in the official statement provided by Mr. Kwek, he highlighted that they have agreed to put aside their differences for the greater good of CDL and its stakeholders. They will continue to focus on strengthening CDL’s business, in accordance with good corporate governance and maximising shareholder value.

  • 13 March – Singapore Post Limited (“SingPost”) announced that its shareholders have agreed on the proposed disposal of SingPost Australia Investment Pty Ltd, in turn which owns Freight Management Holdings Pty Ltd (“FMH”). The sale of FMH will help unlock strategic value for SingPost shareholders, which is expected to earn SGD 289.5m gain on disposal. The proceeds from the disposal will be used for debt repayment of approximately SGD 307.8m and a special dividend to be announced.

    At the same time, SingPost also announced an SGD 30m investment in the Regional eCommerce Logistics Hub facility, enabling the expansion of eCommerce processing capacity for future growth. The investment primarily consists of the installation of new sorting equipment, increasing the amount of small parcels to be processed per day by three-fold. In addition, it serves to free up significantly more floor space, allowing future enhancements. 

Declaration: For specific disclosure, at the time of publication of this report, the analyst who produced this report holds a NIL position in the abovementioned securities. IFPL (via its connected and associated entities) holds positions in HSBC 5.546% 04Mar2030 Corp (USD), STANLN 4.300% 19Feb2027 Corp (USD), ASTLC 3.250% 18Mar2031 Corp (USD) - Class A-2 and OLAMSP 4.000% 24Feb2026 Corp (SGD).


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