CFD Bonds
CFD Bonds are financial derivatives that provide investors with exposure to OTC Corporate Bonds at a lower notional value. i.e., You can purchase S$50,000 of a S$250,000 minimum denominated Corporate Bond.
The performance of CFD Bonds mirror the actual underlying Corporate Bond, including the actual market price fluctuations, coupon payments, corporate actions.
Initial Margin for CFD Bonds starts from 20% (5x Leverage) for selected investment grade rated bonds.
Financing rate for CFD Bonds
A floating financing rate is charged on CFD Bonds, which references the T-2 published rate and are refreshed on daily basis,
- SGD - SIBCSORA (overnight SORA) + 1.80%
- USD - OBFR01 (US Overnight Bank Funding Rate) + 1.80%
Advantages of CFD Bonds
- Reduced volatility and improved portfolio diversification: Bonds are an asset class that have lower volatility and diversify client portfolios.
- Stable income and predictable cash flow: Bonds provide a stable income stream with a predictable cash flow schedule. Additionally, interest payments are accrued daily.
- Lower capital requirement: CFD Bonds have a lower notional value starting from 50K, and combined with 5x leverage, it makes the initial capital outlay more accessible to clients.
- No spot conversion needed: No spot conversion is needed for initial margin. For example, investors can deposit SGD for USD positions without the need for currency conversion.
- Fixed commission fee: CFD Bonds have a fixed commission rate of 0.20% on the contract value, providing transparency to the costs.
- Waived custody and corporate fees: custody fees and corporate fees are waived, further reducing the overall fees for clients.
CFD Bond Watch List
| Ccy | Issuer | Security | Moody Rating | S&P Rating | Fitch Rating | Indicative Initial Margin | ISIN |
|---|---|---|---|---|---|---|---|
| SGD | BARCLAYS PLC | BACR 8.3 PERP | Ba1 | - | BBB- | 20% | XS2498454342 |
| SGD | ESR REIT | EREIT 6.632 PERP | - | - | - | 20% | SG7IC6000006 |
| SGD | ESR GROUP LTD | ESRCAY 5.1 25 | - | - | - | 20% | SGXF72581444 |
| SGD | GLL IHT PTE LTD | GUOLSP 4.6 PERP | - | - | - | 20% | SG7LH0000005 |
| SGD | KEPPEL CORP LTD | KEPSP 2.9 PERP | - | - | - | 20% | SGXF23112406 |
| SGD | LENDLEASE GLOBAL COMMERC | LREIT 5.25 PERP | - | - | - | 20% | SGXF95088013 |
| SGD | MAPLETREE TREASURY SVCS | MAPLSP 3.95 PERP | - | - | - | 20% | SG7BB1000008 |
| SGD | OLAM GROUP LIMITED | OLGPSP 5.375 PERP | - | - | - | 20% | SGXF39597590 |
| SGD | SOCIETE GENERALE | SOCGEN 8.25 PERP | Ba2 | BB | BB+ | 20% | FR001400BPT5 |
| USD | ALIBABA GROUP HOLDING | BABA 4.4 57 | A1 | A+ | A+ | 20% | US01609WAW29 |
| USD | HSBC HOLDINGS PLC | HSBC 8.113 33 | Baa1 | BBB | A- | 20% | US404280DS59 |
| USD | LENOVO GROUP LTD | LENOVO 5.831 28 | Baa2 | BBB- | BBB | 20% | USY5257YAL12 |
| USD | LLOYDS BANKING GROUP PLC | LLOYDS 8 PERP | Baa3 | BB- | BBB- | 20% | US53944YAV56 |
| USD | MEITUAN | MEITUA 3.05 30 | Baa3 | BBB- | BBB- | 20% | USG59669AC89 |
| USD | MACQUARIE BANK LONDON | MQGAU 6.125 PERP | Baa3 | BB+ | - | 20% | USQ568A9SP31 |
| USD | SOCIETE GENERALE | SOCGEN 9.375 PERP | Ba2 | BB | BB+ | 20% | USF8500RAC63 |
| USD | STANDARD CHARTERED PLC | STANLN 7.767 28 | A3 | BBB+ | A | 20% | USG84228FL77 |
| USD | SINGAPORE TELECOMMUNICAT | STSP 7.375 31 | A1 | A | Au | 20% | USY79985AD29 |
This list is not exhaustive as there are numerous bonds available in the OTC market. As a guide, we offer SGD and G7 currency denominated CFD bonds, subjected to our internal risk framework.
For more details, please check with your Trading Representative or send your enquiries to the Fixed Income team directly atsg.cfdbondapps@cgsi.com
Bond CFD Trading Example: The example below is meant for illustration purpose only and do not represent any advice or trading strategy
Trade Example 1
Client’s projected return if bond is called on first call date, while assuming price and financing fee remain constant throughout the period.
Underlying Bond: BARC 8.3 PERP (ISIN: XS2498454342) Indicative Market Ask Price: 101.50 Notional Value: SGD 50,000.00 First Call Date: 15th Sep 2027
Contract Value = SGD 50,000.00 x 101.50 = SGD 50,750 Accrued Interest Payable = SGD 90.96 (Settlement Date as of 23rd Jun 2023) Initial Margin @ 20% of Contract Value = SGD 10,150 Commission @ 0.20% of Contract Value = SGD 50,750 * 0.20% = SGD 101.50
Initial Capital Outlay = SGD 10,150 (Initial Margin) + SGD 90.96 (Accrued Interest) + SGD 101.50 (CFD Commission) = SGD 10,342.46
Projected Quarterly Coupon Payment till First Call Date = SGD 1,037.50 * 17 = SGD 17,637.50 Face Value = SGD 50,000.00 CFD Financing fee till First Call Date (1,545 Days) = SGD 50,750 * 5.16% / 365 Days (Indicative Daily Financing fee) * 1,545 Days = SGD 11,084.63
Estimated Return in this Example + SGD 10,000.00 (20% Initial Margin of Face Value) + SGD 17,637.50 (Total coupons received) - SGD 11,084.63 (CFD financing fee) - SGD 10,342.46 (Initial Capital Outlay) = SGD 6,210.41
Return in % p.a. on Initial Capital Outlay = SGD 6,210.41 / SGD 10,342.46 = 60.04% / (1,545/365) Years = 14.18% Return p.a