SGD New Issue Review : HDB 5Y 2.288%
ISSUER: Housing and Development Board
FORMAT: S274 & 275 and Reg S Bearer, Fixed Rate Notes (off Issuer’s S$32bn Multi-currency MTN Programme)
STATUS: Fixed Rate, Senior Unsecured
ISSUE SIZE: S$500mm (with an option to upsize)
SETTLEMENT DATE: 19 September 2014
MATURITY DATE: 19 September 2019
COUPON DATES: 19 September and 19 March (First Pay: 19 March 2015)
ISSUE PRICE: 100.00
COUPON: 2.288% s/a, ACT/ACT, Following Business Day Convention
DETAILS: S$250k x S$250k / MTN Prog / SGX-ST / Singapore Law
How to buy ?
5 year interest rates at 1 year high, currently at 1.88%.
5 year average of 5 year interest rate is 1.54% but the 5 year high for 5 year interest rates is 2.55%.
Chart : 5 year SGD interest rates over a 1 year period
2.288% is halfway there or as we would say in Singapore, not here or not there. Because CPF is 2.5% !!!!
Yet this would NOT BE the highest coupon for a HDB 5 year issue, which is incidentally their favourite tenor, in the past 4 years. An issue done about a year ago in Sep 2013 gave us a coupon of 2.365% for 5 years.
And this would also not be the widest credit spread we are seeing for HDB in the 5 years at its credit premium of about 0.41%.
To make it worse, 5 year government bonds are catching up on their yields, now returning 1.53%. Last year this time, we were looking at 0.95% which made the 2.365% HDB a steal at that time.
Chart : 5 year SGD government bond yields
The last HDB 10 year 3.1% issue done in July is slightly under water as I type, at about 99.50/100.00. https://tradehaven.net/market/sgd-new-issue-review-hdb-10y-3-10/
I do not find it a compelling buy especially with a new 5 year government bond slated to be auctioned on the 26th of this month.
SGD 500 mio priced, the smallest issue we are seeing in over 15months.