Temasek offering first retail bonds at 2.7% fixed interest

Temasek has an overall credit rating of Aaa by Moody's and AAA by S&P. The bonds have been rated Aaa by Moody's and AAA by S&P. PHOTO: ST FILE

Investment company Temasek has launched its first public bond offer for retail investors.

It comes with a five-year maturity and a fixed interest rate of 2.7 per cent. Temasek is offering up to $200 million of bonds to retail investors, with $200 million on placement for institutional, accredited and other investors.

The T2023-S$ bond is issued under Temasek's $5 billion Gua-ranteed Medium Term Note Programme. The offer could be increased to $500 million if the public or placement offer is oversubscribed.

Temasek chief financial officer Leong Wai Leng said: "We are pleased to offer Temasek bonds to retail investors for the first time.

"This helps Temasek to broaden its stakeholder base and provide Singapore retail investors the opportunity to participate in another retail product.

"(The bonds) also increase our funding flexibility."

Temasek has an overall credit rating of Aaa by Moody's and AAA by S&P. The bonds have been rated Aaa by Moody's and AAA by S&P.

The net proceeds from the total offering will be used for the investment firm's business operations.

Sources expect the offer to be strongly subscribed. At 2.7 per cent, the bond's interest rate is about 38 basis points over the five-year Singapore government bond, which is trading at about 2.32 per cent.

The latest Singapore Savings Bond has an interest rate at the five-year mark of 2.54 per cent.

Its average annualised return at the end of the fifth year is 2.22 per cent.

Mr Santosh Bukitgar of Credit Suisse said the credit risk is minimal, with "Temasek being one of the few non-sovereign AAA-rated credits".

But he added that investors will still be exposed to interest rate risk. "An exit before maturity could incur capital losses if rates trend higher as expected," he said.

The fixed interest rate of 2.7 per cent is payable every six months. The bond will be issued in denominations of $1,000 to retail investors. The issue price is $1,000.

Individuals can apply via the ATMs of DBS Bank, POSB, OCBC or UOB, or go online at DBS or POSB.

The bond is eligible for inclusion under the CPF Investment Scheme - Ordinary Account. Members can use up to 35 per cent of their investible CPF savings to apply for the bonds under the public offer or to buy later on the market.

CPF savings cannot be used to apply for bonds under the placement. SRS (Supplementary Retirement Scheme) funds also cannot be used.

Retail investors will need a CDP account to apply.

Subscriptions for the public offer will be subject to balloting and allocation if demand exceeds the amount available.

The public offer opens today and closes at noon on Oct 23. The bonds are expected to trade on the Singapore Exchange on Oct 26.

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A version of this article appeared in the print edition of The Straits Times on October 17, 2018, with the headline Temasek offering first retail bonds at 2.7% fixed interest. Subscribe