CEO Morning Brief

Author: edgeinvest   |   Latest post: Thu, 18 Aug 2022, 8:36 AM


Singapore Joins Green Finance Bonanza With 50-year Bond

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(Aug 4): Singapore began marketing its first green bond to raise as much as S$2.4 billion (US$1.7 billion), choosing a 50-year tenor as it joins countries from South Korea to Egypt looking to fund the battle against climate change.

With financial markets volatile, the debt maturing in 2072 is being sold via syndicate, a first for the country. Initial price talks centered on the 3.15% area, according a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it.

While Singapore doesn’t have a traditional 50-year bond, the yield on its 30-year conventional debt stood at 2.8% on Thursday, Bloomberg data show. The yield on Singapore's 30-year bonds has risen this year

“This offers an opportunity to accumulate ultra long duration with some yield pickup over the 30-year, although the 30y/50y spread is not expected to be much,” said Winson Phoon, head of fixed income research at Maybank Securities. Although long-dated notes have taken a hit due to rising rates this year, “the market has been gradually regaining interest in long duration” due to concern about a US recession.

Officials details on the price and the yield will be published later on Thursday, according to the Monetary Authority of Singapore website.

The country is a relative latecomer to the booming global market for sustainable debt. Europe is the dominant region for issuance, and fellow Asian financial hub Hong Kong raised HK$20 billion (US$2.5 billion) via its first green bond for retail investors earlier this year.

Asia hub

“Singapore is an international financial center, and just like Hong Kong, Singapore knows that the green element is important,” said Tamami Ota, head of sustainable finance research unit at Daiwa Institute of Research Ltd.

Keen to position itself as an environmental finance hub, the city state is already encouraging sustainable issuance with a program to fund sustainability certification of companies’ bonds and loans. Still, its local-currency green debt market is smaller that of fellow Asian financial hub Hong Kong, Bloomberg data show.

Singapore’s debut green issuance will fund the expansion of its electric rail network. It is part of the government’s plan to raise as much as S$35 billion of environment-focused financing by 2030. Officials have already set out standards for sustainable investments, defining what actually qualifies as a green.

Project proceeds:

  • The money will help finance Singapore’s Green Plan 2030, notably two lines of the MRT electric rail system
  • The network already encompasses six lines and more than 130 stations; the target is to extend it by 2030 to about 360km
  • The Green Plan aims to achieve 75% use of mass public transport to achieve a 80% reduction in land transit emissions by mid-century

The bookrunners for the syndication are DBS Bank Ltd, Deutsche Bank AG Singapore Branch, The Hongkong and Shanghai Banking Corporation Limited Singapore Branch, Oversea-Chinese Banking Corporation Limited, and Standard Chartered Bank (Singapore) Limited.

Source: TheEdge - 5 Aug 2022

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