SGX’s April Bond Listings Hit 2014 High

SGX hosted its largest number of new bond listings for 2014 in April with 56 issues introduced in the month, up 40% from March and beating this year's previous high of 44 in January. Many of the new listings were driven by growing interest in variable rate bond structures. April's listings continued the flurry of issuance seen in the March quarter, which was briefly interrupted in February on concerns about Asian growth. Foreign issuers accounted for 75% of April's total while US dollar issuance made up 68%.

The global bond market more broadly is in a transition phase as the Federal Reserve winds down its quantitative easing program, signalling a shift away from its extremely accommodative monetary policy. Having benefitted from the historically low interest rate environment over the past few years, bond issuers seem to be considering transaction structures that help investors mitigate the risks of rising interest rates.

Floating Rate Notes

A significant portion of new SGX bond listings in March and April came through floating rate note structures. In these two months, floating rate notes accounted for 25% of new bond listings in March (10 bonds with S$4.19 billion raised) and 18% in April (10 bonds with S$2.68 billion raised) compared with 7% in April a year earlier (3 with S$0.75 billion). All these bonds were primarily issued by Asian banks, predominantly in US dollars and in short tenors of up to three years. As the market moves away from a "zero interest rate" environment, bond investors will increasingly seek instruments that can deliver higher yields if and when interest rates rise. Floating rate notes tend to perform better than plain-vanilla bonds under these conditions and the best time to buy these instruments is while interest rates are still low.

SGX Fixed Income

SGX's fixed income market is organised into two main segments: the retail bond market and the wholesale bond market. SGX-listed retail bonds are offered to the public and traded on the exchange's Mainboard in much the same way stocks are. SGX-listed wholesale bonds are only distributed to institutional or accredited investors in larger denominations and are primarily traded over-the-counter. More information on SGX-listed debt securities can be found here.

Debt Securities (with ≥ USD750 million issue size) listed on SGX in April 2014: