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HDB sells S$1b seven-year bonds at 2.50%

THE Housing & Development Board (HDB) on Friday sold S$1 billion seven-year bonds at 2.50 per cent, amid volatile markets.

Demand for the bonds was lower than expected as HDB has an option to upsize by S$600 million.

"Market was very choppy in the past few days, swinging all over the place," said Clifford Lee, DBS Bank head of fixed income.

The sale was done within two hours in the afternoon, he noted. HDB still has the option to sell the remaining S$600 million later, he said.

Buyers were mainly banks due to HDB's Aaa rating.

"Our customer base of individual investors tends not to be too interested in such low-yielding longer duration paper, but we're hearing that the deal is well-anchored, probably with strong interest from the banks which are incentivised to hold the Aaa paper thanks to banking liquidity rules," said Terence Lin, iFast's regional research manager in the fixed-income division.

Last week, banks were reported to be bidding for the largest issue yet from HDB, totalling up to S$1.6 billion, said IFR.

The Singapore statutory board had asked banks for proposals to sell a seven-year bond for a target size of S$1 billion and a S$600 million greenshoe, said IFR, a Thomson Reuters publication.

If it does achieve the maximum deal size, it will beat its largest single issue, when it sold a S$1.5 billion 1.875 per cent four-year issue in November 2013, IFR said.

The rated HDB notes have a zero risk-weighting and qualify as Level 1 high-quality liquid assets (HQLA) under the Monetary Authority of Singapore's rules on liquidity coverage ratios (LCR), said IFR. Previously, the unrated notes qualified as a Level 2 HQLA and were subject to a 15 per cent haircut under LCR rules.

ANZ, DBS Bank, Deutsche Bank, and Industrial and Commercial Bank of China (ICBC) Singapore handled the sale.