July 16, 2012 / 8:34 PM / 5 years ago

Singapore wealth fund Temasek sets 30-yr coupon record

July 16 (IFR) - Temasek Financial on Monday set a fresh record low coupon of 3.375% for a US dollar-denominated 30-year bond, coming inside the 3.60% achieved by agribusiness Monsanto Co just a week ago.

The company, which is guaranteed by Temasek Holdings, the Singapore government’s investment arm and one of the few Triple A-rated institutions left in the world, sold US$1.7 billion of debt in a two-part deal comprising 10.5-year and 30-year notes.

Spreads on the deal consistently narrowed in from the time the deal was announced early on Monday, even after it was offered with an initial price guidance that was well inside the sovereign fund’s curve.

This was on a day when credit markets were choppy as a weaker than expected retail sales report confirmed a slowing US economy. Treasury yields set new intraday lows in two-years to five-years and came close to new lows in longer maturities.

Initial guidance in Asia came at Treasuries plus 105 basis points (bp) area on both tranches. Revised guidance came in tight of that on both tranches, with the 10.5-year revised/final guidance coming in at plus 100bp-105bp, and the 30-year final guidance tightening to plus 95bp-100bp.

Finally, a US$1.7bn deal was launched with the US$1.2bn 10.5-year pricing with a spread of plus 100bp (2.375% at 99.163 to yield 2.466%) and the US$500m 30-year set at a spread of plus 95bp (3.375% at 97.653 to yield 3.502%).

The 3.375% coupon on the 30-year tranche is the lowest on record, coming well inside the Monsanto 3.60% July 2042’s priced on July 9, according to the Thomson Reuters/IFR all-time low coupon tables.

The 2.375% coupon on the 10.5-year tranche ranked number four in the 10-year bucket (which ranges from 2.00% to 2.80%), but was not able to take top honours.

With some of the top domestic corporates able to price in the plus 55bp-70bp range, it was always going to be tough for this Yankee FIG (financial institutions group) name to compete in the 10-year maturity.

Temasek has more disclosure than most sovereign wealth funds, but still nowhere near what SEC-registered deals are required to provide.

3M Co on June 21 hit the market with the 2.00% June 2022s, which is a very tough benchmark to beat. The company that beats this record will sport the first 10-year coupon inside of 2.00%.

However, the inverted 10s/30s curves seen on many of these higher-rated Asian issuers allowed Temasek to grab the top spot in 30 years.

The last time Temasek was in the market was in 2009.

On July 5, the company said profits for the year ended March 31 had dropped about 15.4% to S$11bn from S$13bn a year earlier.

As of March 31, its net portfolio value was S$198bn, up S$5bn from a year earlier. The company said it has delivered a shareholder return about 1.5% in the past year.

Citi, Deutsche Bank, Goldman Sachs and UBS were joint books on the deal.

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