Fears of a United States interest rate hike dampened the bond market in the first half, with little prospect of an uplift over the next six months.
There were $10 billion worth of new issuances in the Singapore-dollar bond market in the six months to June 30, down 14 per cent from a year ago, said an OCBC report.
Interest rates are seen as the culprit behind the drop. Singapore interest rates closely track the US benchmark, which is expected to rise from near-zero levels in September. That prompted many borrowers to "front load" their refinancing needs to the first half, said Mr Nick Wong, fixed-income analyst at OCBC.
"For example, many of the Reits (real estate investment trusts) have already met their refinancing needs in the first half of 2015."
New issuances from corporates also outpaced total maturities in the first half - more evidence of front-loading.
Shorter tenors were popular in the first half: Issuances averaged 4.3 years,downfrom 4.9 years in the same period last year, said the OCBC report.
Shorter-dated tenors were popular in the first half. Issuances averaged 4.3 years, down from 4.9 years in the same period last year, said the report, which was released last week. Shorter-tenure bonds have lower duration risk and so fare better amid rising interest rates.
Meanwhile, other issuers may have chosen to delay their issuance until rates stabilise after the US Federal Reserve makes its move, Mr Wong said. The slip in bond issuance in the first half was also due to the fact that the Housing Board did not make a single Singapore dollar-denominated bond issue this year, OCBC said.
HDB bond issuance peaked last year, with six bond issues totalling $4 billion, of which $2 billion was issued in the first half.
Combined with a reduction in the supply of flat launches from last year, this could mean that HDB has less need to raise capital for now, Mr Wong said.
The offshore and marine sector also turned in zero new issuances in the first half as their credit profiles deteriorated on the back of lower oil prices.
This does not include government-linked SembCorp's $600 million perpetual bond issuance in May, or PT Logindo's $50 million debt issuance in January, which was backed by a UOB letter of credit and therefore counts as UOB credit risk rather than sector risk.
Offshore marine companies accounted for $2.8 billion in total issuance last year, including $900 million in the first half.
Despite offshore marine players' remarks that the worst is over, OCBC predicts that issuance activity in the next six months will remain soft.
But the next few months will also see Singapore debut a long-awaited covered bond market. Covered bonds refer to debt issued by banks that is secured by their pool of residential mortgages.
Last month, DBS began a global roadshow to sell its US$10 billion covered bonds programme to investors in Asia, Europe and the United States. The first issue, to target institutional investors, will be made in the US dollar or the euro, said DBS.
UOB is also expected to launch a covered bonds programme in this half of the year.
OCBC estimates Singapore's covered bond market to be around $25 billion to $30 billion, based on the issuance limit of 4 per cent of the issuing bank's total assets.
However, it does not expect issuance to be large, given that local banks enjoy "sufficient liquidity and still-strong access to unsecured debt at competitive rates".