Issuing limits raised for Singapore government securities and treasury bills

THE issuing limits for government securities and treasury bills have been raised to meet Central Provident Fund (CPF) needs and cater to growing investor demand, with Parliament having voted to authorise this on Tuesday.

A new tool will also let the government issue treasury bills on an ad-hoc basis for short-term cashflow management.

The government may now borrow up to S$960 billion via the issuance of government securities, an increase of S$270 billion from the earlier S$690 billion limit.

It is also authorised to issue up to S$105 billion in treasury bills, an increase of S$45 billion from the previous S$60 billion limit. Both new limits are expected to last five years, till 2025.

Moving the relevant motions in Parliament, Second Minister for Finance Lawrence Wong highlighted that these increases "are for specific market development and operational needs purposes, and not to cover the government's fiscal shortfall".

Proceeds from such issuances are invested and not used as government spending. An increase in such borrowings will increase the government's cash and liabilities, but will not increase its fiscal budget.

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Under the Government Securities Act and Local Treasury Bills Act, there are limits - authorised by Parliament - on the amount of government securities and treasury bills, respectively, that the government can issue.

The government has already utilised the earlier treasury bills limit, and expects to utilise the earlier government securities limit before the middle of this year.

"There is therefore a need to raise these limits, to cater to the growth in demand for government securities and treasury bills over the next five years," said Mr Wong.

Government securities are issued for specific purposes. Singapore Government Securities (SGS) are issued to develop the domestic debt market and provide financial institutions with high-quality liquid assets to meet regulatory requirements; Special Singapore Government Securities (SSGS) are non-tradable bonds issued primarily to meet the investment needs of the CPF; Singapore Savings Bonds are issued to provide a long-term savings option for individual investors.

Treasury bills, meanwhile, are issued to develop the domestic short-term debt market and to meet market demand for short-term rated Singapore dollar instruments.

The last time that motions were moved to increase the issuance limits were in November 2016 for government securities, and August 2007 for treasury bills. In 2016, the raising of the ceiling to S$690 billion had been expected to last five years till 2022.

Explaining Tuesday's move to raise the limits, Mr Wong said that the government now projects that the outstanding amount of government securities will reach S$960 billion by the end of 2025.

About 74 per cent of the S$270 billion increase is expected to be issued to the CPF as SSGS to meet its investment needs, he said, adding that CPF balances are expected to increase due to growth in the resident labour force and wages.

The remaining 26 per cent of the increase is for the issuance of SGS, to support the continued development of this market and meet increased demand.

There has also been an increase in investor demand for treasury bills; issuing more bills will help meet this demand, he said.

"We will continue to monitor the market demand for both government securities and treasury bills, and will increase the rate of issuance to meet this demand, if necessary."

The increased limit for treasury bills also takes into account a new short-term cash-management tool, under which treasury bills can be issued on an ad-hoc basis to meet temporary cashflow mismatches.

The Cash Management Treasury Bills (CMTB) programme is expected to have a maximum total size of no more than S$10 billion.

"The introduction of this tool is part of the government's ongoing efforts to expand our cash-management toolkit and will provide more operational flexibility to raise cash quickly, should any short-term cashflow mismatches occur in future," said Mr Wong.

The tenor of CMTB will be tailored to meet the period of need and will be less than six months, as it will be issued solely for short-term cashflow management.