Bond sales in Singapore had their busiest week in three months as Italy’s biggest bank chose the island-state’s currency to raise debt.
UniCredit SpA (UCG) sold S$300 million ($244 million) of 10-year notes priced to yield 5.5 percent on Jan. 16, its debut issue in a Southeast Asian currency, according to data compiled by Bloomberg. Borrowers sold S$1.2 billion of debt last week, the most since S$1.4 billion was issued in the seven days ended Oct. 21, the data show.
The bond market in Singapore, one of only eight countries with a top AAA rating and stable outlook from all three major global ratings companies, surged 46 percent last year to a record S$31.2 billion, Bloomberg data show. The jump surpassed the 35 percent increase in offerings to $80 billion by all members of the Association of Southeast Asian Nations, the data show.
“We opted for Singapore dollar issuance to build our presence in Asia, which is important for us to diversify our funding sources,” said Waleed El Amir, the Milan-based head of strategic funding at UniCredit. “We opened the market for other people and expect that given the success of our deal, there will be other issues that can follow.”
Notes sold in the island’s currency returned 3.1 percent in the past year versus 2.3 percent for Thailand and 4 percent for Malaysia, HSBC Holdings Plc local-currency indexes show. That compares with a return of 2.2 percent that investors earned on U.S. Treasuries, Bank of America Merrill Lynch indexes show.
UniCredit is paying a coupon of 6.95 percent on 1.5 billion euros of notes due 2022 which it sold in October, and 250 million euros of similar-maturity debt issued last month, according to data compiled by Bloomberg.
“We issued at the same level as our 10-year bullets and secondaries in Italy, so we paid no premium to access” the Singapore market, UniCredit’s El Amir said. “Comparing the two issuances -- the one in euros made last year for a 10-year bullet and this one -- the Singapore dollar issuance is slightly cheaper.”
ICICI Bank Ltd. sold its largest Singapore dollar- denominated bond earlier this month, pricing its S$225 million of notes due January 2020 at 3.65 percent, Bloomberg-compiled data show. The Mumbai-based lender last issued bonds in the island’s currency in April 2011.
The number of non-Singaporean banks helping to arrange more than one percent of the island’s bond sales has risen to 10 in 2012 from five in 2008, the data show.
“More new issuers, especially foreigners, will tap the market now,” said Clifford Lee, the head of fixed-income at DBS Bank Ltd., the top-ranked arranger of Singapore dollar bonds since 2009. “Previously they were all waiting and seeing, thinking they wouldn’t come to an experimental market. Now the verdict is out that this market is real and can support meaningful issuances.”
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