Retail investors made a beeline for Temasek's first public retail bond offer, leaving it more than eight times subscribed.
The $200 million tranche garnered valid applications of around $1.68 billion when the offer closed at noon yesterday, said Temasek in a statement.
On account of the oversubscription, a balloting and allocation process will take place and its results will be announced by tonight.
The T2023-S$ Temasek Bond, as it is called, comes with a five-year maturity and a fixed annual interest rate of 2.7 per cent, payable twice a year.
The bonds are expected to trade on the mainboard of the Singapore Exchange on Friday.
Financial experts like Mr Deepak Khanna, head of wealth development at HSBC Bank (Singapore), had expected the new bond to attract a lot of interest from retail investors, given its credit rating and the familiar brand name behind it.
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What you should know about Temasek's first retail bonds
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1. This is a five-year bond paying a fixed interest of 2.7 per cent a year. Interest is paid every six months with the principal amount repaid in 2023. Temasek is guaranteeing all interest payments and the full repayment of the principal.
2. Retail investors had to apply for the bonds with a minimum investment of $1,000 and in multiples of $1,000.
3. Before applying, they had to ensure their Central Depository accounts were ready and linked to the relevant bank account. After the Temasek bonds start trading on the Singapore Exchange on Friday (Oct 26), they can be bought and sold just like any listed stock. Besides cash, buyers can use their Supplementary Retirement Scheme savings. The bonds will also be included under the Central Provident Fund Investment Scheme.
4. There are risks involved in bond investments. They include default, interest rate changes and other risks. For instance, an issuer may fail to pay the interest or even fail to repay the principal amount when its bonds are due. In addition, interest rates in the market may rise and this may cause the bond price to fall. If you need to sell your bonds in such situations, you may suffer a loss.
5. Temasek has been issuing bonds since 2005 as public markers of its credit quality. Bond prices may rise or fall in the market. If the price falls more than other bonds, it may be a public signal that investors have concerns about the credit quality of its issuer.
He noted that this was an opportunity for retail investors to access the bond market, which is traditionally offered only to accredited investors.
"The T2023-S$ Temasek Bond would be suitable for retail investors seeking to diversify their portfolio away from equities and looking for a steady cash flow.
"Retail investors who are new to bond investments may also use this as a stepping stone to gain some exposure, given the T2023-S$ bond has a low minimum investment amount of $1,000 and one of the highest credit ratings," he said.
Teacher Joyce Chua, 53, said she helped her 78-year-old mother apply for $20,000 of the Temasek bond as it is principal guaranteed and the return is higher compared with low-risk alternatives like fixed deposits and government bonds.
The new bond's interest rate is more attractive than the latest Singapore Savings Bond, which has an average annualised return of 2.22 per cent at the end of the fifth year.
Mr Clifford Lee, global head of fixed income at DBS Bank, said the robust demand is a signal that investors are looking for high-quality retail bonds from top-rated issuers.
"In the light of the strong reception, we hope to see more retail bond offerings from quality issuers, with the same execution style, in the future," he added.
A similar $200 million tranche for institutional investors was also popular, with Temasek announcing earlier that it was 7.19 times subscribed.
The total offer is subject to an option to upsize the issuance to $500 million, in the event that the public and/or placement offer is oversubscribed.
The bonds are issued through Temasek's wholly owned subsidiary, Temasek Financial (IV) Private Limited, under its $5 billion Guaranteed Medium-Term Note Programme.
