MAS expects to issue first tranche of SGS (Infrastructure) bonds in Q4 of 2021

[SINGAPORE] The Monetary Authority of Singapore (MAS) will issue a new category of infrastructure bonds, with the first issuance expected in the fourth quarter of this year.

The Ministry of Finance (MOF) announced this on Monday (April 5), shortly after Deputy Prime Minister Heng Swee Keat tabled a proposed law in Parliament which will allow the government to borrow money to spend on major national infrastructure projects that will benefit multiple generations.

The Singapore Government Securities (Infrastructure), which will be created under the proposed Significant Infrastructure Government Loan Act (SINGA), will rank pari passu - Latin for on equal footing - with the current category of SGS.

This existing category, issued to develop the domestic debt market, will be renamed SGS (Market Development), and the money raised remains unavailable for spending.

Both categories of the bonds will be priced along the same yield curve and will have the same tax and regulatory treatment, said the MOF. "MAS will also manage the SGS (Infrastructure) and SGS (Market Development) programmes holistically to ensure that overall issuance supply is calibrated to market demand," added the ministry.

OCBC economist Selina Ling said this should reassure investors that there would not be "supply indigestion", or a lack of demand, when the first issue of SGS (Infrastructure) is rolled out later this year.

Under SINGA, the government also plans to issue green bonds to fund long-term infrastructure projects which are considered environmentally sustainable, such as the new rail lines. These green bonds will count towards the total borrowing limit of S$90 billion specified under the proposed law.

Meanwhile, public agencies will also issue green bonds for non-SINGA projects.

Amendments will also be made to the Financial Procedure Act to provide for capitalisation of the portion of infrastructure financed through borrowings under SINGA.

This capitalisation will allow the government to convert upfront development expenditure into a stream of annual depreciation and spread development costs across the generations who will benefit.

Annual depreciation, together with annual interest costs, will be met from the annual budget. Said MOF: "We will still have to have an overall balanced budget over each term of government."

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