Demand rises for latest Singapore Savings Bond with 10-year average return at 3.15%

THE latest Singapore Savings Bond (SSBs) allotted on Wednesday (Mar 29) experienced a rise in number of applications, exceeding the amount on offer, after months of falling demand due to declining yields.

The April tranche of the Singapore government-backed bonds received a total of S$758.1 million in applications, compared with the total of S$261.1 million in applications for the March issuance.

A maximum of S$700 million in SSBs were offered and allotted through the quantity ceiling format.

Applicants who applied for S$68,500 or lower were fully allotted. Around 83.4 per cent of the applications who applied for S$69,000 or higher were allotted S$69,000 at random; the remaining applicants were allotted S$68,500.

Those successful in their applications will be issued the notes, which have a 10-year tenor, on Apr 3.

The auction closed with higher demand amid turmoil in the banking industry, due to the collapse of Silicon Valley Bank in the US and Credit Suisse in Europe, among others.

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This tranche of SSBs also offered a higher yield than previous tranches. The April issuance offered a first-year interest rate of 3.01 per cent, and a 10-year average return of 3.15 per cent.

In comparison, the March issuance opened with a first-year interest rate of 2.76 per cent, and a 10-year average return of 2.9 per cent; a February tranche offered a first-year interest rate of 2.84 per cent, and a 10-year average return of 2.97 per cent.

Interest in SSBs had declined as yields were on a downward trend earlier this year. The February issuance received applications totalling 68 per cent of the amount offered, while the March issuance was less than half subscribed.

Separately, an auction for a 15-year Singapore Government Securities (SGS) bond closed on Wednesday, with a cut-off yield of 2.8 per cent per annum.

The auction is a reopening of an existing bond that matures on Jul 1, 2039, with a coupon rate of 2.375 per cent per annum.

The SGS auction drew a total of S$2.9 billion in applications for the S$1.4 billion offer, giving it a bid-to-cover ratio of 2.1. Non-competitive bids totalled S$299.6 million and were fully allotted. MAS was allotted S$200 million in this auction. The average yield for the bond instrument stood at 2.55 per cent, while the median yield was 2.7 per cent.