Commodities trading house Noble Group recently struggled to buy up some of its bonds on the market even though bondholders should have been glad to sell, given they were trading at well below their issue prices.
As its chief executive Yusuf Alireza related to investors at a shareholder meeting last week, the objective of the company "to buy back some bonds is to see if there are any bonds to sell".
But that turned out to be very difficult. Mr Alireza said: "The bond prices are marked down with no real offer or liquidity."
In the end, Noble managed to buy US$31.61 million (S$45 million)of a bond due in 2020 whose "screen price" - the quote offered by traders - had fallen to a record low of 40.5 US cents to the dollar. It also bought U$1 million of another note due in 2018.
Since announcing the purchase on Jan 28, the Noble bonds due in 2020 have rallied 11.5 per cent.
Short-sellers have been arguing that the distressed levels at which Noble bonds are trading is a vote of no confidence in the company's finances.
Since last year, they have been besieging the company, following a series of attacks by an anonymous outfit called Iceberg Research on Noble's accounting practices.
But the struggle faced by Noble in buying its bonds suggests an inconvenient truth for short-sellers: As trading conditions turn volatile and credit markets seize up, genuine bond buyers and sellers are having trouble finding each other.
Bonds such as those issued by Noble are traded on the over-the-counter market operated by a network of banks.
In recent years, however, the difficulties of trading bonds in the secondary market have been exacerbated in markets such as the United States, as banks are forced to trim corporate bond trading operations due to new regulations and shareholder pressure to curtail risks.
This has forced some banks to close their once-sprawling "proprietary" trading desks and retrench their market-making operations.
Not that Noble is the only company facing this contradiction over the pricing - or mispricing - of its bonds. Another well-known anomaly surrounds the perpetuals - a bond-like instrument offering a fixed payout but no shareholder rights - issued by Genting Singapore.
The casino operator issued two tranches of the perpetuals more than three years ago - a $1.8 billion tranche to fund managers traded on the OTC market and a $500 million tranche to retail investors the following month that is traded on the Singapore Exchange (SGX).
For all intents and purposes, the two perpetual issues are identical, enjoying a 5.125 per cent coupon rate.
But the tranche sold to fund managers always trades at a lower price than the retail tranche, a reflection of the OTC market's lack of liquidity.
Worse, as sentiment turns cautious, the spread seems to have widened. The fund manager tranche, which trades in the OTC market, is marked down to a 3 per cent discount to the issue price, while the retail tranche, which trades on the SGX, enjoys a 2 per cent premium to issue price.
Corporate issuers, rated as investment grade, can at least look forward to regulatory changes that will allow them to break up their bonds into denominations as low as $1,000 and get them traded on the SGX once they have been in issue for six months.
This will give their bonds another much-needed avenue of liquidity - from retail investors - if trading dries up in the OTC market.
But such an option will not be available to the many un-rated bonds issued by corporates during the recent times of plenty when the only concern among yield-hungry investors was the coupon rate on offer.
Now that the appetite for investment risk has dwindled, one scary scenario confronting many of these issuers is that they find themselves in a similar bind as Noble with their bond prices depressed to distressed levels, even though their finances stay healthy.
For them, it is a case of hell knowing no fury like a bond-holder scorned.