MEASURES to broaden and deepen Singapore's corporate debt market are a welcome development. For companies, debt issuance provides an important and attractive alternative to bank financing.

For investors, bonds are a core holding in portfolios, providing income and a welcome counter point to the volatility of equities. Demand is underpinned by an ageing population and a never ending thirst for yield despite expectations of higher interest rates in the near to mid term. Several initiatives by the Monetary Authority of Singapore are aimed at strengthening issuance and boosting confidence in a market buffeted last year by a wave of defaults in the oil and gas sector. The Asian Bond Grant, launched earlier this year, allows MAS to co-fund half of a first-time issuer's related issuance expenses by up to S$400,000. A second initiative is a grant to offset the cost of a credit rating by up to S$400,000. There will also be a green bond grant scheme to offset up to S$100,000 of the costs relating to the external review required for issuance.

The incentives are part of a comprehensive effort to enhance Singapore's standing as a premier financial hub, but there are challenges. Debt issuance has softened this year, based on data from Thomson Reuters which found a 23 per cent decline in bond proceeds in the year up to June. DBS Group Research finds a similar trend - S$19 billion was raised in 104 new issues in the whole of 2016, versus S$22 billion from 159 issues in 2015. While sluggish domestic economic growth is likely to have dampened capital market activity, the travails of oil and gas issuers - notably Swiber's and Swissco's collapse and consequent defaults - are likely to have spooked smaller high-risk issuers. Last year, five companies defaulted on some S$1 billion of debt, and KPMG expressed concern that defaults would widen to developers as well.