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Singapore bonds power to fresh heights

With supply low, investors are buying in secondary market, focusing on familiar names and high-grade credit



PRICES of Singapore dollar bonds continue to rise, hitting new highs, powered by lack of supply.

"There's not enough supply to soak up liquidity," said Clifford Lee, DBS Bank head of fixed income on Friday.

The Markit iBoxx Singapore corporates return index hit 118.5385 on Thursday in an almost non-stop rally since the start of the year. So far primary issuance has been slow and bond investors have been buying in the secondary market focusing on familiar names and high-grade credit, said Mr Lee.

Prices of Mapletree Investments' S$625 million 4.5 per cent perpetual bonds have risen strongly, it was quoted at 101.645 on Thursday. The wholly owned Temasek Holdings company sold its perpetual bonds on Jan 12 at 100 par. It was also the first deal for 2017.

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Said Neel Gopalakrishnan, Credit Suisse emerging markets bond analyst, private banking research:"In the SGD market, there has been no meaningful supply of new bonds or further negative credit news, which has supported secondary market valuations."

Building on the sluggish end to 2016, 2017 has started on a similarly slow note, said bondsupermart in a Jan 24 note. New Singdollar issuance was down 55.9 per cent lower year-on-year for Q4 2016.

As of Jan 24, we've seen just three Singdollar issues launched so far in 2017, for a total issuance of S$895 million, it said. bondsupermart is a unit of iFast Corp.

In comparison, the year-ago period saw S$2.44 billion of new Singdollar issuance, although the timing of the Chinese New Year may be a factor - the holiday period falls in January this year, while the 2016 Chinese New Year period was in the month of February, it said.

"We've seen the USD-SGD correct somewhat this year, which has been accompanied by a decline in domestic rates - this has boosted the performance of SGD corporate bonds so far in 2017," said Terence Lin, assistant director of bonds and portfolio management at iFast.

The Singdollar weakened again on Friday; it was quoted at S$1.43 from S$1.42 on Thursday, though it is still stronger than the one-month low of S$1.45 on Dec 28. The 3-month SOR or swap offer rate has fallen substantially since the start of the year; it stood at 0.801 per cent on Thursday, down from 1.04 per cent on Dec 29.

"We're also observing an improvement in investor risk appetite in the high yield SGD segment, which has led to a pick-up in some of the higher-yielding SGD bonds," said Mr Lin.

Year-to-date Oxley Holdings 5 per cent 2019 has returned 3.2 per cent; Rowsley Ltd 6.5 per cent 2018 is up 1.5 per cent; and G8 Education 5.5 per cent 2019 has returned 1.3 per cent.

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