August used to be a time when investors packed their bags and headed off for summer vacation, but not anymore. On Tuesday, Singapore’s NTUC Income Insurance Cooperative and India’s ICICI Bank both closed heavily subscribed bond offers, suggesting there is plenty of liquidity for the right names.
Insurer NTUC Income on Tuesday night set a new benchmark in the Singapore dollar market when it priced a S$600 million ($480 million) subordinated bond. The deal was a debut bond for NTUC Income, and a rare one out of the insurance sector. As such, it attracted a blowout S$9 billion ($7.2 billion) worth of orders, the biggest book ever for a Singapore dollar bond — comfortably exceeding the S$6 billion of orders for Genting Singapore’s S$1.8 billion perpetual in March.
“The deal ticked all the boxes,” said a source. “It was a quasi-sovereign name offering rare paper, and it priced inside all the other subordinated Singapore dollar paper and set a new benchmark.” NTUC Income is a Singapore government-linked insurer and rated AA- by Standard & Poor’s. The bond, which is rated A+ by S&P, priced inside all the relevant comparables, which included tier-2 issues from Great Eastern Life and the local banks.
The leads — DBS, Citi and Standard Chartered — started out with initial price talk of 4% for NTUC Income’s 15-year tier-2 issue, which has a call option at the 10th year. The closest comparable, the outstanding Great Eastern Life tier-2, which matures in 2026, was trading at a yield of 3.9%. This put fair value of a new Great Eastern tier-2 of a similar maturity in the low 4% area and the leads felt that NTUC Income, with its government-linked halo, ought to come tighter. NTUC Income is linked to the Singapore government through the National Trade Union Congress, Singapore’s trade union.
By 2pm on Tuesday, a tremendous amount of orders flooded in, chalking up to $6 billion. This allowed the leads to tighten sharply, with the final guidance coming at 3.65% to 3.75%. The bonds priced at the tight end — at 3.65% — which was equivalent to a spread of 188bp over the 10-year swap offer rate. They found a strong bid in secondary and rose to 101 on Wednesday.
Insurance accounts were allocated 34%, asset managers 28%, private banks 20%, banks 13% and other investors 5%. Singapore investors were allocated 83%, Hong Kong investors 13% and other investors 4%.
The notes are subordinated to the claims of NTUC Income’s senior creditors, including policyholders. According to a source, NTUC Income is well capitalised and is using the funds to help expand its operations. The coupon for the bonds resets at the 10th year at a spread of 188bp over the prevailing five-year swap offer rate.
Elsewhere, there is expected to be issuance in Singapore dollars. Mapletree Commercial Trust will be holding a roadshow, arranged by DBS and OCBC, and IDBI Bank concluded roadshows in Singapore on Wednesday.
