* Sustainability bonds likely to prove tough sell for
yield-hungry Singapore investors
By Daniel Stanton and Kit Yin Boey
SINGAPORE, April 10 (IFR) - The International Bank for
Reconstruction and Development, or World Bank, is
exploring a potential issue of retail bonds in Singapore to
boost interest in sustainable development bonds and tap the
In a briefing to potential investors last Tuesday, the
multilateral institution said it was working with arranger DBS
to find a suitable structure for a retail bond offering.
"It might not be in Singapore dollars," said George
Richardson, director in the capital markets department at the
World Bank treasury. "It could be in another currency. That's a
discussion we are having with DBS."
The World Bank has been looking at selling Sustainable
Development Goals bonds, which support the UN drive to end
poverty, protect the planet and ensure prosperity for all.
Last month, it raised 163 million euros from the sale of SDG
bonds of 15 and 20 years to institutional investors in France
and Italy. The return on investment is directly linked to the
performance of stocks in the Solactive SDG World Index, which
comprises 50 companies deemed to dedicate at least one-fifth of
their activities to sustainable products or to be leaders in
related issues. The bonds are also capital protected.
However, the World Bank may not be able to sell such bonds
to its intended target market in Singapore, as only plain
vanilla structures are allowed.
"At the moment, regulations prevent retail from purchasing
those," said Richardson. "Private wealth can, but 'retail
He said the bank was discussing with the Monetary Authority
of Singapore about a potential exception for the instruments,
given that the principal was protected and the issuer was such a
high-quality institution. The World Bank has previously sold
retail bonds in markets like Japan and Italy, and part of the
objective of such an issue in Singapore is to develop the local
The World Bank provided $181 million of funding to Singapore in
1963-75, according to a presentation, helping to develop
institutions like the National University of Singapore and the
bank that became DBS, but the city state has long since turned
While welcoming this initiative to deepen Singapore’s retail
bond market, debt bankers believe a retail bond may not be
“It is simple: Singapore investors want yields,” said one
syndicate banker. “A World Bank bond will pay a very low yield,
probably lower than deposit rates.”
High-net-worth investors are likely to snub the potential
issue as well.
“For me personally, I would not be interested as I want
yields,” said one investor.
The Triple A rated supranational agency has previously sold
bonds in Singapore dollars to institutional investors. In its
most recent issue, in August 2014, it sold S$500 million ($357
million) of five-year bonds at 1.473 percent, below the
Singapore dollar swap offer rate, and a new issue would be
expected to come in line with, or even inside, Singapore
That could make it hard to attract Singapore's retail
investors, who have largely turned up their noses at the yields
on offer from Singapore Savings Bonds, which are government
securities targeted at them. Despite low transaction fees of S$2
for subscription and redemption, and the option to cash out
every month with no penalty, undersubscription has been chronic.
The first bond in October 2015 targeted up to S$1.2 billion,
but attracted orders of only S$413.2 million. While the
government aimed to raise up to S$4 billion from SSBs in 2015,
it only managed S$711.5 million.
The April 2017 issue attracted eligible orders of S$70.8
million, from a maximum available S$150 million size. This
month's bond offers an average annual return of 2.32 percent
over 10 years, based on the Singapore Government Securities
Retail bonds from high-yield issuers like Hyflux and Oxley
Holdings, paying 5 percent or higher, have been more popular.
Singapore's year-on-year core inflation rate was 1.2 percent
in February. This compares to rates of up to 3.5 percent
citizens and permanent residents can currently earn on their
Central Provident Fund accounts, the country's social security
savings plan, although there are many restrictions on
(Reporting by Daniel Stanton and Kit Yin Boey; Editing by
Vincent Baby and Steve Garton)