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Up to RM4bil in 1MDB’s bond pricing losses!

March 30, 2013

(But investors have found to their chagrin that they are unable to subscribe, and that the bonds are issued to a select club instead through private placements….

So…1MDB’s bond is only for private placement .. Ponzi or worse still an outright ‘robbery’ of the country’s coffers…as usual doing the “national service”  ..EPF, Petornas, LTH, LTAT or the superich crony outfits willing to risk-take as it infact sovereign guaranteed anyway…hehe.. . Will decent Financial Institutions or Fund Mangers dare touch such bonds…?)..Will the regulatory authority esp SC pls act o this!!…. Dr Dzul)

 

Preliminary calculations by KiniBiz with the help of bond specialists show that mispricing of 1Malaysia Development Bonds could have been as high as 20 percent of the total bonds involved, or some RM4 billion on bonds issued or in the process of being issued of some RM20 billion.
Bond issues made by 1Malaysia Development Bhd (1MDB) have raised substantial interest because of their attractive interest rates.
But investors have found to their chagrin that they are unable to subscribe, and that the bonds are issued to a select club instead through private placements.
“I would have loved to get my hands on those bonds,” one bond trader said.
Basically, what happens is that the bonds are priced to yield more than the market rates. And because these bonds are long-term, they yield higher interest rates over many years.
Once they are on the market, the prices adjust to yield returns with comparable securities, giving windfall gains to those who got in on the first floor.
Financial shenanigans
It’s just yet another example of financial shenanigans that routinely take place in the world today with big-name investment banks associated with them and working hand-in-hand with the issuers.
For this to happen, the transactions need to take place in private with as little of the terms as possible coming into public hands so that few will notice the mispricing.
The secondary trading too often takes place under veils of secrecy to stop prying eyes from discerning how much the players have made.
Bonds are financial instruments that need to be handled with care because there is one variable that can send their values tumbling – or rising. That is interest rates.
If a bond is priced to yield more than comparable yields, the value of the bond can be considerably different.

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One Comment leave one →
  1. Davinder Singh permalink
    March 31, 2013 10:15 am

    Dr it was great meeting you outside empire shopping complex last Friday. Keep on the good work you are doing on behalf of all Malaysians for a true fair Malaysia that we can live in and be proud of. You with your actions and warmly greating me a total stranger and a non Malay speaks volume about who you are and you struggle to have a Malaysia which is colored bling in religion and race. We all belong to one race and that is the human race and who ever says otherwise do not belong to the human race. PAS for all and be god with you in your struggle for a better Malaysia. Please take back Putrajaya Jaya for the citizens of Malaysia as it is rightly belongs to the citizens and not a property of Neo racist and facists of the BN be it Malays chines or Indians all of them are racist to the core. Shame on BN

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