Singapore prices S$2.6 billion of 20-year green bonds at 2.4%

[SINGAPORE] The first offer of Singapore’s 20-year sovereign green bonds received healthy demand, with an order book 1.83 times the amount offered to institutional investors.

The bonds were priced to yield 2.4 per cent, about 15 basis points tighter than the initial price guidance of 2.55 per cent, according to a notice by the Monetary Authority of Singapore (MAS) on Wednesday (Jul 22).

The offering will comprise S$2.6 billion of bonds – the maximum of the S$2.1 billion to S$2.6 billion range provided by MAS – on the back of a S$4.6 billion order book.

The bookrunners are DBS, Deutsche Bank, HSBC, OCBC and Standard Chartered.

The pricing of 2.4 per cent is roughly in line with the overall rate environment, which has led to global long-term government yields trending upwards, as well as the prevailing yields of 20-year Singapore Government Securities (SGS), said Cyrus Ng, senior research analyst at Bondsupermart.

According to statistics from MAS, the benchmark 20-year SGS had a yield of 2.34 per cent as at Wednesday, indicating that the latest sale had a new-issue concession of about six basis points.

While demand was healthy, Ng said the pricing was more a function of higher yields continuing across July rather than exceptionally strong investor interest.

The effective yield of 2.4 per cent reflects a coupon rate of 2.375 per cent and an offering price of S$99.605 per S$100 in principal value.

The offer amount includes S$50 million of bonds that will be set aside for the public, who can begin to apply for the bonds from 9 am on Thursday to noon on Jul 27.

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MAS added that a diverse mix of high-quality institutions invested in the bonds.

Investor interest

Jerome Tay, senior portfolio manager at Aberdeen, noted that with the uncertainties in the global macroeconomic environment as well as escalating geopolitical tensions, the demand for this sale of 20-year green bonds reflects investors’ confidence in Singapore’s government and its economy, as well as its ability to attract safe-haven capital flows.

Another driver of demand is that these bonds, which will mature on Aug 1, 2046, will replace the existing 20-year benchmark bonds maturing in March 2046.

There is demand among long-term investors in Singapore for long-duration sovereign bonds, as these are relatively scarce and illiquid in the secondary market, said analysts.

This latest offer, officially called Green Singapore Government Securities (Infrastructure), is the eighth in a series of sovereign green bonds that have been issued under the Singapore Green Bond Framework.

Given that this is the first time a 20-year green bond is being offered, pricing is being set by syndication, just like for the inaugural issuance of the 30-year and 50-year green bonds.

Most green bond offerings were subsequently priced via auctions that followed a strict calendar, similar to conventional SGS.

So far, the government has issued S$7.7 billion in 50-year green bonds across four tranches, and S$5.8 billion with a 30-year tenor over three offerings.

It has indicated that a pipeline of up to S$35 billion in sovereign and public-sector green bonds will be issued by 2030.

A key aspect of the green label for the bonds is that the proceeds will be used to finance expenditures in support of the Singapore Green Plan 2030, including that for two new MRT lines – the Jurong Region Line and the Cross Island Line.