DBS prices Singapore's first notes referencing Sora benchmark
Singapore
DBS Bank has priced floating-rate notes with the Singapore Overnight Rate Average (Sora) as the reference rate for the calculation of interest - said to be an industry first.
The issue of S$20 million floating-rate notes, due 2021 with a one-year tenor, comes under its US$30 billion global medium-term note programme, DBS said on Wednesday.
The notes will bear a coupon rate of compounded daily Sora + 0.65 percentage point per annum, payable quarterly in arrear, with compounded daily Sora calculated using a five-business-day look-back observation period.
The notes are expected to be issued on May 14, 2020 and the net proceeds from the issue of the notes will be used for DBS's general business purposes. DBS was the structuring adviser and sole lead manager for the offering of the notes.
The issue of the Sora-referenced notes is in line with the roadmap of the Association of Banks in Singapore and the Singapore Foreign Exchange Market Committee (ABS-SFEMC) for the development of new Sora-based markets.
Philip Fernandez, DBS's group corporate treasurer, said: "This is an important step in the industry's plan to develop an active market for financial instruments linked to Sora. We will continue to work together with ABS-SFEMC to encourage adoption of Sora-based products."
Last August, it was announced that Singapore would move from the Singdollar Swap Offer Rate (SOR) to Sora over the next two years. This comes on the back of the discontinuation of the London Interbank Offered Rate (Libor) at end-2021, which would affect SOR as it uses the US-dollar Libor in its computation.
Sora was selected as the new interest rate benchmark as it was found to be the "most robust and suitable alternative", underpinned by a deep and liquid overnight funding market.
While DBS has issued the first Sora-referenced floating rate notes, several banks in Singapore - including DBS, Deutsche Bank, OCBC Bank, Standard Chartered and United Overseas Bank - have already undertaken Sora-derivative transactions.
Last November, OCBC and Standard Chartered completed Singapore's first overnight indexed swap derivatives transaction using Sora as the interest rate benchmark.
