Temasek raises $1.5 billion through 10-year bond

The Asian bond splurge seems unstoppable, and now it has reached the top of the credit pyramid. Temasek Holdings (Temasek), the Singapore government-owned investment company, early yesterday morning raised $1.5 billion with a 10-year bond, riding a wave of irresistible enthusiasm for Asian names.

Investors worldwide, having poured money into bond issues launched in the US and Europe, are recognising the merits and relative value attractions of borrowers from Asia, where economic recovery appears the strongest and most sustainable.

Asian borrowers have issued more than $45 billion in bonds denominated in G3 currencies this year, according to data provider Dealogic. That compares with just $16.8 billion last year, and already exceeds the previous all-time high of $43 billion in the whole of 2005.

Temasek's rapid deal was launched and priced within 24-hours at 95 basis points over the 10-year US Treasury yield, following initial price guidance of 95bp-105bp. It pays a semi-annual coupon of 4.3% and was re-offered at 99.775 to yield 4.328% to a maturity date of October 25, 2019. Yesterday, in the wake of the pricing in the early hours of the Asian morning, it traded as tight as 89bp.

The total demand amounted to $4 billion and featured 193 accounts, most of which were real-money fund managers, who ended up with 43% of the deal, according to sources familiar with the transaction. Insurance companies and pension funds were sold 25%, central banks 13%, commercial banks 12% and retail 7%. US investors bought 62% of the deal, while Asian and European accounts were allocated 25% and 13% respectively.

Temasek issued a $1.75 billion 2015-dated bond in 2005, which, although pretty illiquid, was quoted on Monday at 120bp over US Treasury yields and 57bp over mid-swaps. The new 10-year bonds, offered at around 80bp over mid-swaps, conceded very little over the swap curve for the extra four years.

Temasek-linked companies ST Engineering, Port of Singapore Authority (PSA) and SingTel Optus have already raised an aggregate $1.5 billion from US dollar bond issues since July. And for some investors these issues provided the clearest reference point. ST Engineering and PSA were bid at 118bp and 115bp respectively on Monday, but all three of these companies are a few steps away from the Singapore government's immediate embrace if things were to go wrong.