Astrea VI mispriced?

 

(Screenshot from FSMOne. This is the only place I can find that publishes the YTM calculations for SGX bonds - small caveat is that these are clean prices - fortunately, the accrued interest is very low Astrea VI just went XI and FPLSP just starting trading).

Today was the first day of trading for the new Frasers 4.49% retail bonds. Even though I was a satisfied holder of Fraser's previous 3.65% bonds, I did not subscribe to the 4.49%. I didn't subscribe because I didn't find the interest rate attractive. I think the default risk is pretty low so I would buy some if I needed somewhere to park extra cash and if the YTM was higher than Astrea VI.

This brings me to Astrea VI. I bought more at $0.95 today. At that price and YTM of 4.5%, it is far more attractive than Frasers 4.49%. For that matter, it's also more attractive than Astrea VII.

However, its possible that FSMOne is calculating YTM from the 2031 date with step-up interest rather than the first call date on 2026 (its more likely that the bond will be fully redeemed in 2026).

Astrea VI has:

• Lower default risk - due to its reserves account being built up.
• Shorter maturity date - corporate bonds with longer durations should have higher yields to compensate investors.
• An A+ (sf) rating from Fitch/S&P

So it is strange that as Astrea VI was sold down today, investors were bidding up the Frasers 4.49% bond. 

Furthermore, the Astrea VI semi-annual report was published yesterday with the good news that there would be a bonus 0.5% redemption premium and that an additional US$17m was added to the reserve account (over and above the scheduled US$51.5m)

So even if the YTM is overstated, I think that Astrea VI is investment grade and a good place to park some of my funds, together with SSB and T-Bills.