There is further evidence that investors in parts of the Asian bond markets, including private banking clients, have taken a hit as certain issuers come under strain.

There is further evidence that investors in parts of the Asian bond markets, including private banking clients, have taken a hit as certain issuers come under strain. Latest reports say the fall in the oil price – which has accelerated after OPEC producers did not agree output cuts – is causing problems.

A report late last week from Bloomberg noted that bonds from oilfield service providers are the worst performers among all local Singaporean notes this year. Two-year paper issued by Swiber Holdings, a firm that builds offshore platforms, have seen a sharp fall in price. Much of this paper had been bought by private banks for their high net worth clients.

The newswire noted that private banks have bought 86 per cent of the 20 highest-yielding local notes issued this year as the central bank warned about rising sales to individuals. There is a crunch potentially on the way because Swiber and Ezra Holdings are due to repay S$720 million ($552 million) of notes within the next two years.

Another report last week noted that reluctant private banks also explained some of the weakness in paper issued by Aspial Corp, the listed jewellery firm. The S$100 million four-year debt issuance of Aspial attracted a book of just over S$100 million ($77.1 million), leaving little upside for the bonds in the secondary markets despite a higher yield and a 50 cent rebate to private banks.

It has been pointed out to WealthBriefingAsia in the past that local currency bonds, such as investment grade paper, had been a popular asset class for private bank clients.

However, as the price of crude oil has fallen to lowest levels in five years, some of the economic assumptions underpinning this bond issuance have been undermined.

At a briefing for journalists recently attended by this publication, JP Morgan said that dollar-denominated paper issued in oil-producing states could be hit by the fall in the oil price, though it should be noted that falling prices are positive for importers of oil, such as Japan.