Singapore Telecommunications (SingTel) returned to the international bond markets for the first time in just over a year on Monday with a capped $500 million deal that entered a market showing very clear signs of indigestion.
Continuing strong supply has run up against secondary market selling pressure, leading Asian investment grade spreads to gap out by up to 12bp on the day.
Sales desks said much of the downward pressure came from brokers marking spreads wider after being hit with bonds from fast money accounts, which have been selling out on the realisation that real money investors are getting full allocations and are not topping up in secondaries.
Most of the selling pressure was concentrated in recent new issues, which are now trading under water. Benchmark Singaporean spreads were more stable, however, averaging a 3bp-4bp widening at the 10-year point of the curve on Monday.
Syndicate bankers hope this fact, combined with relatively thin supply from the Lion City, will enable SingTel's new 10-year deal to perform in the secondary market, or at least remain stable on Tuesday when markets will also be digesting the impact of the first US presidential debate between Hillary Clinton and Donald Trump.
Slim new issue premium
Singapore's sovereign-linked borrowers have long had a reputation for overly aggressive pricing but SingTel appears to have made some concessions to market conditions, offering a slim new issue premium rather than trying to push pricing through its secondary curve.
The Aa3/A+ rated credit built up a peak order book of $1 billion by the time guidance was revised according to syndicate bankers. This was in line with recent precedent, although lower than Singapore Power and PSA Corp's recent efforts.
PSA Corp was the most recent to access the international bond markets with a $700 million deal in early April that attracted a peak order book of $1.4 billion and final order book of $1 billion.
Prior to this, Singapore Power accessed the markets in November 2015 with a $500 million deal that had the highest peak order book of the three at $1.7 billion, although it also included a 144a tranche.
SingTel's new transaction was Reg S only and indicative pricing was initially pitched 95bp-100bp over Treasuries.
Final pricing was fixed at 99.33% on a coupon of 2.375% and yield of 2.451% or 85bp over Treasuries. The issuance vehicle was Singapore Group Treasury with a guarantee by SingTel.
Final distribution stats show that 52 investors participated with a split of 92% Asia and 8% Europe. By investor type, banks took 60%, insurers 12%, private banks 3% and public sector 1%.
The 15bp tightening was slightly better than the 12bp the group achieved when it last came to market in June 2025 with a $500 million deal.
This achieved a final order book of $1.35 billion and was the main benchmark for the new offering.
On Monday, the outstanding 3.25% June 2025 offering opened on a G-spread of 77bp or 81bp depending on which broker quoted it. It closed about 3bp-4bp wider.
Given the Treasury curve is worth no more than a couple of basis points, this means the new deal has priced with a zero to 4bp new issue premium.
"Market conditions did affect the borrower's ability to squeeze pricing through secondary levels because accounts were less aggressive than normal bidding for paper," said one syndicate banker.
"But if you look at pricing on an absolute yield basis this is a great result for the issuer since the June 2025 deal was priced with a 3.385% yield and this deal has priced with a 2.451% yield.”
Both the other two main comparables also came under mild selling pressure.
Over the course of the trading day, PSA Corp's 2.5% April 2026 deal gapped out about 4bp and was trading on a mid-yield of about 2.37% by the end of the day compared with 2.33% on Friday, according to one broker's quotes.
Likewise, Singapore Power's 3.25% November 2025 bond closed at 2.37% on Monday compared to 2.34% on Friday.
SingTel has a one-notch lower rating than Singapore Power from Moody's and is two-notches lower rated against PSA Corp. It has a two-notch lower rating than both entities from Standard & Poor's.
However, all three Temasek-linked groups tend to trade as a pack and syndicate bankers said investors once again ignored the rating differential, even though Moody's has made plenty of warning noises about SingTel's leverage.
In its rating release for the deal, the US agency said the bond deal will be leverage neutral since proceeds are being used to re-finance debt and will push out the group's maturity curve.
Widening its regional footprint
In mid-August, it warned that any further increase in leverage, or continued leverage at current levels over a sustained period, would warrant a downgrade.
It noted that net adjusted leverage will rise to 2.17 times FY2017 following SingTel's proposed acquisition of stakes in Bharti Telecom and InTouch, the parent company of Thailand's largest mobile phone operator, Advance Info Services (AIS).
In August, the group announced an agreement to purchase a stake in Bharti and in InTouch from its parent Temasek for S$2.47 billion ($1.8 billion). According to Moody's this will increase its effective stake in Bharti to 36.2% and effective stake in AIS to 31.8%.
Net leverage should increase only marginally since the major portion of the deal, which should close in December, is being financed via a share placement to Temasek.
Joint global co-ordinators for the bond deal were DBS, HSBC and Morgan Stanley.
