Singa bonds' interest rate set at 1.875%; investors applied for 1.58 times the $2.6b sold

Investors' bids for the first sale of the Singapore Government Securities (Infrastructure) bonds totalled $4.1 billion.
Investors' bids for the first sale of the Singapore Government Securities (Infrastructure) bonds totalled $4.1 billion.PHOTO: ST FILE

SINGAPORE - Singapore's central bank sold $2.6 billion worth of 30-year bonds to fund infrastructure projects in an auction on Tuesday (Sept 28).

Investors' bids for the first sale of the Singapore Government Securities (Infrastructure) bonds totalled $4.1 billion, 1.58 times the amount sold, the Monetary Authority of Singapore (MAS) said on its website.

The cut-off yield for the so-called Singa bonds came at 1.95 per cent a year, with the coupon rate, or interest payment, set at 1.875 per cent per annum.

The twice-yearly coupon payments fall on Oct 1 and April 1.

Mr Eugene Leow, DBS Bank’s senior rate strategist, said the auction result was  better than expected, given pressure from rising United States bond yields.

The US 30-year bond yield rose 1.1 basis points to 1.994 per cent on Monday after the Federal Reserve said it will start tapering its massive asset purchase programmes and raising benchmark interest rates some time next year.

“There is clear demand for long-dated SGS issuances,” Mr Leow said.

He said the auction result indicates that, as expected, investors are not looking for any discount or premium when it comes to the SGS (Infrastructure) bonds compared with the usual SGS (Market development) bonds.

However, UOB interest rate strategist, Mr Victor Yong, said that in comparing Tuesday’s auction result with past 30-year bond auctions, it seems that market appetite for long-term government securities is close to being satisfied for now. A 30-year bond auction in January this year attracted 1.81 times the $3.1 billion sold, with the yield cut-off at 1.4 per cent.

He noted: “The next long maturity SGS auction will likely take place in the first quarter of 2022, thus there is ample time for digestion and demand to recover.”

This is the first SGS bond to be issued under the Significant Infrastructure Government Loan Act (Singa) that was proposed in February and passed by Parliament in May.

The Act authorises the Government to borrow up to $90 billion over the next 15 years to finance major long-term infrastructure, including the new Cross Island and Jurong Regional MRT lines, and pumping stations and tidal walls to protect the Republic against rising sea levels.

During the debate on the law in Parliament in May, Deputy Prime Minister Heng Swee Keat, who was also Finance Minister then, said Singapore was embarking on a "generational upgrade" to its infrastructure over the next 15 years, and borrowing to pay for the major infrastructure projects will help to smooth out the hump expected in development spending.

With Singa, the money raised now will be repaid over a 30-year period via fixed semi-annual coupon payments.

The Government will continue to issue the SGS (Market Development) bonds to develop the domestic debt market.

There are also plans to issue the Green SGS (Infrastructure) bonds that MAS aims to kick off next year for climate change-related infrastructure.