Singapore issuers should strike while the iron's hot

The primary Singapore dollar bond market has been disappointing this year. The volatility that has hit many Asian markets since the end of 2014, triggered by concerns about commodity prices, Chinese corporate default risk and continuing eurozone distress have all contributed to make it a lacklustre first five months in Singapore dollars.

On top of that, the unexpected move by the Monetary Authority of Singapore’s (MAS) to allow the currency to depreciate this year has also done little to improve investor appetite. Rising SIBOR and SOR rates have added a hurdle for issuers.

This has all played out in volumes. So far this year there has been just S$6.5bn ($4.8bn) worth of issuance from 43 deals, compared to S$9.4bn from 49 deals in the same period last year. That leaves quite a bit of catching up to do: last year's full-year volume was a whopping S$22.9bn.

But there are signs that things could be changing. Last week saw a sudden surge of issuance, with six deals worth S$1.25bn issued between Wednesday and Friday. No other week in 2015 has seen so much activity.

The recent sell-off in US Treasuries, which had sent yields soaring at the beginning of the week, was also reflected in the Singapore dollar market. But rates came down again on Wednesday, and a handful of issuers jumped at the opportunity to issue bonds.

Any others — particularly those with refinancing needs — should do the same.

Taking advantage of lower rates while there is still time is one reason. But improving investor sentiment is another. Those on the buyside who had been avoiding the Singapore dollar market because of currency depreciation are now looking more favourably at it since MAS’s April decision to maintain its policy stance and not allow further depreciation of the Singapore dollar.

Last week’s issues highlighted this new sentiment, particularly as investors showed themselves ready to absorb a variety of issuers and structures.

Sembcorp's S$600m issue was the second largest in Singapore dollars this year (after Frasers Centrepoint's S$700m deal in March), and the second perpetual issue in the currency in 2015. The week also saw debuts from a Chinese name, China Metallurgical Group Corp (S$300m), and a real estate investment trust, Soilbuild Business Space Reit (S$100m).

This clutch of issues shone a light of hope in a market that has been quieter than usual, but that's not to say that every issuer can feel free to pile in and expect tight pricing — the market is still limited to good quality names. Last week's issues all came from blue-chips or the subsidiaries of investment grade names.

But for those that do fall into that category, timing for a Singapore dollar issue may not get much better for a long time. Bankers are unsure how long it will be before yields jump again, and in any case rate hikes from the US Federal Reserve continue to loom.

Issuers should jump on board now, or risk missing the bus altogether.