SINGAPORE - Temasek's first retail bond debuted on Friday (Oct 26), opening at 102.5 cents to the dollar and touching a high of 102.8 cents before hovering at 102.3 cents at 3.30pm.
The T2023-S$ Temasek Bond pays 2.7 per cent per annum and matures in five years, in October 2023. It trades in board lots of $1,000 in principal amount of the bonds.
Mr Richmond Zhan, head of fixed income at Phillip Securities, noted that the buy queue was strong with a large number of orders queued at 102 Singapore cents: "There is still strong demand for T2023 despite the tight yield at 2.2 per cent. Demand could come from investors topping up their allocation and also this being the first and only Temasek bond available for retail investors."
However, Mr Zhan said he was surprised when the bonds opened above 102 cents: "I believe retail investors priced the bonds too high. The yield (for the Temasek retail bonds) should not trade below those of Singapore Government Securities (SGS) or HDB."
Bond yields fall when prices rise. In theory, bonds issued by corporates are expected to trade at a higher yield than government bonds. This is because of the risk premium that investors should demand for holding riskier corporate debt. Government debt is considered to be the safest debt to hold and this comes with a lower yield.
At 99.7 cents to the dollar over the counter, the HDB 2.42 per cent bonds due 2023 offer a yield to maturity of 2.48 per cent, Mr Zhan said. Meanwhile, at 102.10 cents to the dollar, the 2.75 per cent Singapore government bond due 2023 offers a yield to maturity of 2.27 per cent.
Temasek has a corporate credit rating of Aaa by Moody's and AAA by S&P, and it has emphasised that it is classified as a corporate issuer, not government. HDB on the other hand is considered quasi-government, while SGS are issued by the Singapore Government.
A total $300 million worth of Temasek bonds were offered under the retail tranche, and all applicants who applied for $6,000 and below received full allocations.
Temasek received valid applications amounting to $1.68 billion for the retail tranche, representing a subscription rate of about five times the final public offer size of $300 million, or just over eight times the initial offer size of $200 million.
The prices of retail bonds listed on the Singapore Exchange reflect their "dirty price", which includes accrued interest. Accrued interest has to be deducted from the "dirty price" to reflect the "clean price", which is also the indicative ask price.