The World Bank is exploring a potential issue of retail bonds in Singapore to boost interest in sustainable development bonds and tap the affluent population.
In a briefing to potential investors last week, the multilateral institution said it was working with arranger DBS Bank to find a suitable structure for a retail bond offering, according to the International Financing Review yesterday.
"It might not be in Singapore dollars," said Mr George Richardson, director in the capital markets department at the World Bank treasury. "It could be in another currency. That's a discussion we are having with DBS."
The World Bank has been looking at selling Sustainable Development Goals (SDG) bonds, which support the United Nations' drive to end poverty, protect the planet and ensure prosperity for all.
Last month, it raised €163 million (S$242 million) from the sale of SDG bonds of 15 and 20 years to institutional investors in France and Italy. The return on investment is directly linked to the performance of stocks in the Solactive SDG World Index, which comprises 50 companies deemed to dedicate at least one-fifth of their activities to sustainable products or to be leaders in related issues. The bonds are capital protected.
€163m Amount raised last month from the sale of SDG bonds of 15 and 20 years to institutional investors in France and Italy.
However, the World Bank may not be able to sell such bonds to its intended target market in Singapore as only plain vanilla structures are allowed.
"At the moment, regulations prevent retail from purchasing those," said Mr Richardson. "Private wealth can, but 'retail retail' can't."
He said the bank is discussing with the Monetary Authority of Singapore about a potential exception for the instruments, given that the principal is protected and the issuer is a high-quality institution.
The World Bank had previously sold retail bonds in markets such as Japan and Italy, and part of the objective of such an issue in Singapore is to develop the local bond market.
While welcoming this initiative to deepen Singapore's retail bond market, debt bankers believe a retail bond may not be feasible.
"It is simple: Singapore investors want yields," said a syndicate banker. "A World Bank bond will pay a very low yield, probably lower than deposit rates."
High-net-worth investors are likely to snub the potential issue as well.
"Personally, I would not be interested as I want yields," said one investor.