Singapore prices S$2.5 billion of 30-year sovereign green bonds at 3.3%
The offer amount includes S$50 million in bonds to be set aside for retail investors. Applications open on May 23
SINGAPORE received strong demand for its third sale of green bonds, with an order book 2.45 times the amount offered to institutional investors.
The sovereign issuer also surpassed pricing indications, with the 30-year bonds priced to yield at 3.3 per cent on Tuesday (May 21), about 16 basis points tighter than price talk of 3.46 per cent.
The offering will comprise S$2.5 billion in bonds – the maximum of the S$2.1 billion to S$2.5 billion range provided by the Monetary Authority of Singapore (MAS) – on the back of a S$6 billion order book.
The offer amount also includes S$50 million in bonds that will be set aside for retail investors, who can begin to apply for them between 9 am on May 23 and noon on May 27.
The effective yield of 3.3 per cent reflects a coupon of 3.25 per cent and an offering price of S$99.053 per S$100 in principal value. The book runners for this third offering are Citibank, DBS, HSBC, Standard Chartered and UOB.
“A diverse mix of high-quality institutions invested in the bond,” said MAS in a notice on Tuesday.
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According to deal statistics seen by The Business Times, orders came in from 67 investors, with the majority (53 per cent) from insurance companies. Fund managers accounted for 32 per cent of the buyers; the rest were banks, including interest shown by the joint lead managers for S$700 million.
Demand for these 30-year bonds, which mature on Jun 1, 2054, were arguably stronger than for the first two offerings, which had tenors of 50 years.
Both rounds of the sale of those 50-year bonds, with a total issuance size of S$5.2 billion, were priced to yield at 3.04 per cent, which was about 11 basis points tighter than price talk of about 3.15 per cent.
The order book this time was also more than the 2.26 and 1.43 times of the amount offered in the previous sales, which took place in August 2022 and August 2023.
One possible reason for this issuance’s strong demand is that it has come at a time when interest rates are at the end of their peak cycle, noted Cyrus Ng, senior research analyst at Bondsupermart.
This is in contrast to the macroeconomic environment when the 50-year green bonds were being issued, as the talk then was that there could be more rate hikes.
With the market pricing in two rate cuts by the United States Federal Reserve by the end of this year, bond prices are expected to go up, and the price increase of long-duration bonds tend to be of a larger magnitude than shorter-duration ones, said Ng.
This most recent sale of 30-year green bonds is set to replace those maturing in October 2051 and would serve as the new benchmark for 30-year bonds.
Given that these 30-year bonds have been fairly illiquid in the secondary market, MAS issuing green bonds with such a tenor could be a response to feedback from investors looking to build up their holdings of 30-year bonds, said Jerome Tay, investment analyst for fixed income at asset manager abrdn.
The scarcity of such bonds in the market, as well as investors’ confidence in the credibility of the Singapore government, explains the strong demand for the current issuance, said Tay.
There are also no further plans for MAS to offer any more 30-year bonds for sale, according to its 2024 issuance calendar. Another 50-year bond, however, is set to be offered in September this year.
If the government were to put up a sale of 50-year bonds this time, the demand might not be as strong, given the smaller pool of buyers for bonds of such tenor, though its final price would not differ too much from 30-year bonds, noted Tay.
According to bond statistics from MAS, the yield of 30-year bonds has generally been about one or two basis points higher than 50-year bonds over the last one month. The yield for 30-year bonds closed at 3.36 per cent on May 21, compared with 3.35 per cent for 50-year bonds.
Clifford Lee, global head of investment banking at DBS, said that significant capital and a range of financing instruments are required for Asia to decarbonise while enabling sustainable economic growth.
“Singapore is well-placed to accelerate the development of environmental, social and governance (ESG) financing to support this transition. This is evidenced by a strong track record of ESG-linked issuances from its public and private sector, which have been meaningfully oversubscribed,” he added.
The sale of these 30-year bonds, officially called Green Singapore Government Securities (Infrastructure), is the third in a series of expected sovereign green bonds issued under the Singapore Green Bond framework, though it is the first with a 30-year tenor.
The bonds are expected to be issued on Jun 3, with coupon payments disbursed on the first day of June and December every year, until maturity or when they are redeemed.
The Singapore government has indicated a pipeline of up to S$35 billion in sovereign and public-sector green bonds that will be issued by 2030.
A key aspect of the green label for the bonds is that proceeds will be used to finance expenditures in support of the Singapore Green Plan 2030, including two new MRT lines – the Jurong Region Line and the Cross Island Line.
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