News – BT

SGX to list 19 Singapore govt bonds from July 8

The bonds total $74 billion and have maturities of at least two years

THE Singapore Exchange (SGX) will list 19 Singapore government bonds from July 8 as part of its deeper push into the fixed income market.

SGX, which primed the market for the listing of government bonds a year ago, selected 19 bonds with maturities of at least two years and totalling $74 billion.

‘This initiative is expected to improve price transparency and liquidity in Singapore government bonds, and provide investors with a safe investment alternative that can give both capital protection and steady returns,’ SGX said in a press release yesterday.

Market markers would also be available to help to raise liquidity, added Tng Kwee Lian, head of fixed income at SGX.

A market maker refers to a broker that competes for orders with another market maker by displaying buy and sell quotations of the units of the fund, thereby tightening spreads.

Bonds are debt securities that governments and companies issue. In return for the loan provided by the bond holder, the bond issuer pays out an interest based on a coupon rate and later repays the principal at the bond’s date of maturity.

The minimum investment in a Singapore government bond is $1,000.

Of the 19 securities, the bond with the farthest maturity date – Sept 1, 2030 – has a coupon rate of 2.875 per cent. The coupon payment – made every six months – ranges from 1.125 per cent to 4 per cent for the 19 bonds.

The trading fees for stocks will also be applied to government-bond trading. SGX charges a clearing fee of four basis points on the value for most contracts, or a maximum of $600.

Singapore government bonds are issued by the Monetary Authority of Singapore (MAS) through periodic primary auctions and though unlisted, can still be traded through more than 10 banks, the central bank’s website showed.

These include the three local lenders, Standard Chartered Bank and HSBC, which are tasked to quote two-way prices under all market conditions.

Brokers are uncertain about the demand for government bonds, though one broker from Kim Eng Securities said that he gets enquiries from his clients about government bonds from time to time. SGX will also make its rounds to brokerages to introduce the listing of government bonds over the next few weeks, brokers told BT.

Proceeds from the issue of Singapore bonds are not used to finance government expenditure, as it is done in many countries, but are paid into a government securities fund, MAS noted.

From the fund, any interest and principal repayments on the bonds are withdrawn. A government bond market is typically used as a benchmark for the corporate bond market.

The bonds must be held by SGX’s central depository (CDP) as custodian before they can be traded. The CDP has been a custodian of individual investors’ government-bond holdings since April last year.

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