Singapore's LTA targets tightest spread in years on new bond

[SINGAPORE] Land Transport Authority of Singapore has launched a tightly priced offering of seven-year and 12-year bonds, defying the weak market conditions that have dragged stocks and credits lower lately.

LTA aims to raise S$1 billion (US$710 million), split equally between the two tranches, which can be increased with a S$100 million greenshoe each.

The issue was kicked off just after lunch by sole bookrunner DBS, which priced the tranches to yield 2.57 per cent and 3.09 per cent, respectively.

The seven-year piece yields a very fine spread of 5bp over Singapore dollar SOR, something that has not been seen for a Singapore borrower since Housing and Development Board commanded single digit spreads back in 2012.

The spread on the 12-year tranche was a more typical 20bp. Rival bankers said the pricing was very tight on both tranches, but the deal is attracting good demand from fund managers, insurance companies and financial institutions keen to buy the paper for their minimum liquid assets portfolio.

LTA, a statutory and regulatory board responsible for national transport matters, is seen as a proxy for the Singapore government. The seven-year paper still provides a bit of pick-up over equivalent Singapore Government Securities, which were quoted at 2.35 per cent.

The mandate was awarded yesterday.

IFR