Why so few retail bonds launched?

There has been strong demand for bonds, as shown in the overwhelming interest in and the full subscription of corporate bonds over the last few years.

This is due to investors (including retail ones) seeking higher yields from bonds in a low-interest environment, and the relatively lower risk from investing in bonds.

Bonds are also popular with retirees seeking regular payouts from the coupon payments.

However, many retail investors miss out on the action, as the minimum purchase for corporate bonds is quite high, at $250,000 a lot.

The risk is also higher in corporate bonds compared with retail ones, where the minimum amount is lower, at $1,000 a lot.

The Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX) tried to address the demand from retail investors by working on making bonds available in smaller lots last year.

However, to date, only a few companies have sold such bonds.

I hope the MAS and SGX can explain why only a few retail bonds have been launched so far, despite the strong demand from retail investors.

Goh Geok Huat

A version of this article appeared in the print edition of The Straits Times on March 17, 2017, with the headline 'Why so few retail bonds launched?'. Print Edition | Subscribe