Astrea 7 bonds are open for application. It is the fifth instalment of the Astrea private equity bond series.
Usually retail investors don’t get to participate in private equity (PE), only the accredited investors do. This is because not every investor can stomach the risks associated with PE.
The clever way was to wrap the PE investments into a bond and offer to the retail investors. They can a piece of the PE action but have the assurance and certainty of a bond structure. This was how Astrea PE bonds were born and it has gained popularity ever since.
Let’s get up to date on the Astrea bond performances to date.
The very first Astrea bond (Astrea III) was launched on 8 Jul 2016 and has been successfully called in 2019. It offered a 3.9% coupon rate back then for the SGD denominated bond.
The second issue, Astrea IV, was launched on 14 Jun 2018 with a longer maturity till 2028. The coupon rate was 4.35% for the SGD denominated bond.
This bond is very popular and it is now bidding above Par Value at a clean price of S$102.293 (exclude accrued interest) at the time of writing. This gives us a yield-to-maturity of 2.15%. This is lower than the Singapore Government Bond (SGS) 10-year yield at 2.76%! This shouldn’t be the case because SGS has a higher credit rating.
I think the low liquidity is one of the key reasons for this mispricing. Astrea IV should trade at lower prices due to the rise in interest rate. But I don’t think many want to sell and are happy to just collect the interest till maturity. Or investors are just misguided by the coupon rate. After the bond trades, yield-to-maturity is the one to watch!
The third issue was Astrea V, launched on 20 Jun 2019 and maturing in 2029. The SGD denominated coupon rate was lower at 3.85%. This bond is bidding above Par too with a clean price of S$100.576. That will give us a yield-to-maturity of 3.56%. At least this is higher than the SGS 10y bond yield.
The fourth issue was Astrea VI, launched on 18 Mar 2021 and maturing in 2031. The SGD denominated coupon rate was a mere 3%. It is the lowest so far and it is not surprising to see it trade below Par value. The yield-to-maturity is 3.518% based on a bid price of S$98.158. Still more reasonable than Astrea IV.
Finally we come to Astrea 7. The SGD denominated bond is offering a coupon of 4.125% and maturing in 2032. This is the highest among all and hence I believe this bond would be many times oversubscribed, just like the previous issues.
It isn’t a good time to buy bonds as interest rates are still rising – because bond price moves opposite to interest rate. But we can see the Astrea IV and V are still trading above Par despite rates increase. And if you intend to hold till maturity you get back the principal anyway. And most bond investors don’t just buy one bond, they build a ladder of different maturities and yields. So a portfolio approach may still justify to add bonds at this point in time.
