When Treasury yields were rising late last year, many were predicting the end of the three-decade long bull market in bonds. Even Bill Gross, the manager of the largest bond fund in the world, has been trying to call a top in the bond market. So far though, everyone’s been wrong. In fact, the search for yield is fast approaching a fever pitch.

Consider the case of Ivory Coast, a small country on Africa’s Atlantic coast. In July 2011, the country announced that it would not be making any more payments on $2.3 billion worth of its Eurobonds, pushing the country into default. While the country had been wracked by violence following elections that year, the government’s decision to default was something of a head scratcher. True, the country’s economy had taken a hit, but the government itself forecast that it would take in $2.7 billion in revenues that year, making the $101.1 million in coupons due on the bonds that year look like chump change. The consensus opinion was that the default was essentially strategic, reflecting the government’s shifting post-election priorities.

Interestingly though, those Eurobonds were issued as part of a restructured Brady bond offering from 1998. It was defaulting on bonds issued to help pull it out of a default.

You would think a country with a track record like Ivory Coast’s would have trouble tapping the bond market, but this week, almost exactly three years since its last default, it successfully sold $750 million worth of 10-year bonds. While the 5.625% yield on those bonds is certainly higher than developed market sovereigns, it is hardly the penalty rate you would expect for a serial defaulter, falling roughly on the average yield for frontier market debt. Incidentally, the yield is actually 12.5 basis points lower than the top rate on the bond it last defaulted on. But even with a fairly low yield on a questionable credit, not only did Ivory Coast successfully sell those bonds, it got $5 billion worth of orders.

Just last month Kenya sold $2 billion worth of bonds (with orders of $8 billion); $1.5 billion worth of 10-year notes yielding 6.875% and $500 million of 5-year notes yielding 5.875%. That deal was completed even as the country’s finance minister was explaining a $3.8 billion budget deficit and terrorists had just killed almost 50 people in a bombing.

Zambia, Morocco and, less surprisingly, South Africa have also successfully issued sizable chunks of debt in recent months. Ecuador, which last defaulted in 2008, issued $2 billion worth of bonds this week. Rwanda issued $400 million in Eurobonds last year.

To be clear, I’m not saying that these countries shouldn’t have access to the global bond markets. Assuming the proceeds are managed correctly, they could help these governments develop infrastructure and fund other projects which could help drive greater economic growth and opportunity down the road. But it is hardly realistic to expect that none of these countries will end up defaulting, which almost seems to be implied with the relatively low yields these offerings have been fetching.

My concern at this point is that the bull market in bonds isn’t over yet and is, in fact, approaching a state of mania. Considering the paltry yields to be had in the developed world, a 5% or 6% yield from a frontier market bond is relatively attractive. But that yield won’t be quite so sweet if and when the defaults could occur, which might even necessitate the rival of the 1980s Brady bond program ten years down the road.

Needless to say, I would be very wary of this wave of frontier debt coming to market.

Portfolio Updates

Taiwan Semiconductor (NYSE: TSM) has reported revenues of NT183.02 billion, beating consensus expectations of NT182 billion. Net income rose 15.2% year-over-year, reaching NT59.7 billion while earnings per share came in at NT2.30, well above the expected NT2.16.

Management forecasts that third quarter revenues will reach a new high, falling between NT206 billion and NT209 billion, a 29% increase over last year.

Despite that rosy forecast, shares are off by more than 9% following yesterday’s announcement after the release of a critical research note from Goldman Sachs. Analysts there forecast that demand for Taiwan Semiconductor’s 20-nanometer chips will decline in the second half of this year.

Taiwan Semiconductor isn’t expected to begin production of smaller 16-nanometer chips until sometime in the second half of 2015, by which point Samsung will have already introduced 14-nanometer chips. That’s prompting speculation that Apple might turn to Samsung for the bulk of its smartphone chips beginning in late 2015.

Taiwan Semiconductor Chairman Morris Chang has acknowledged that the company’s share of 14/16-nanometer chips will likely be smaller than that of its competitors next year. But the semiconductor business is highly commoditized and Taiwan Semiconductor is one of the most efficient and lowest cost providers, so I expect it to quickly make up lost ground.

Taiwan Semiconductor remains a buy on dips under 20.