Singapore Infrastructure Bonds: Q&A

Timothy Ang  |   30 Mar 2021  |    146 views

In light of the new infrastructure bonds announced by the Singapore government in the 2021 Budget, here are some Q&A put to us on the topic:

What are some of the gaps or inefficiencies in the infrastructure bond space in Singapore that lenders and issuers have sought to overcome with the government’s help?

Despite the construction slump during COVID-19, infrastructure spending has been on the rise in Singapore, and the Building and Construction Authority (BCA) projects a recovery of construction demand in 2021, ranging between S$23 billion to S$28 billion, an improvement from the estimated S$21.3 billion worth of projects awarded last year. Of these, 65% (between S$15 billion and S$18 billion) is expected to come from public sector projects.

The government sees possible bottlenecks in raising local currency funding due to limited bank lending by Basel III, an aim to preserve local reserves during covid-19, and shortage of access to a wider range of investors particularly during the early project phases where cash flows from the projects are not to be expected. local currency financing is important to avoid currency fluctuation risk as the projects generate local currency revenues. The bottlenecks will be reduced with the AAA rated Singapore government’s backing for infrastructure bonds. it will also help reduce the cost of funding for longer-dated infrastructure bonds. For lenders, the government’s new infrastructure bonds will provide a wider pool of high-quality SGD fixed income investments, and longer dated SGD bonds to match longer-term SGD liabilities particularly for pension funds and insurers.

Where would infrastructure bond issuers likely come from; what kinds of projects will they be for?

Likely issuers will be statutory boards such as Housing & Development Board (HDB), the Land Transport Authority and the Public Utilities Board, as well as government-linked companies that have infrastructure capabilities. Examples of government-linked companies with existing corporate bonds include Ascendas Pte Ltd and Keppel Land Ltd. The anticipated demand is for public housing and infrastructure projects. Some upcoming major public sector projects scheduled to be awarded this year include various contracts under the Jurong Region MRT Line, the Cross Island MRT Line Phase 1 and the Deep Tunnel Sewerage System Phase 2.

Does Singapore currently require any major infrastructure funding needs, e.g. for electric car infrastructure in line with the Singapore Green Plan 2030?

Redevelopment of different parts of Singapore such as Jurong Lake District, Punggol Digital District and Woodlands North Coast etc and rejuvenation of other public infrastructure in mature HDB estates with new schools and hospitals are some major plans. Expansion of the rail network by over 100km over the next 10 years is also on the table. Upgrades to existing infrastructure may also be done, which could be for electric car infrastructure in line with the Singapore Green Plan 2030. We are seeing new agreements to accelerate the adoption of electric vehicles in Singapore, such as the one between SP group and Hyundai Motor Group signed 12 Nov 2020.

Is this a needed move given the increase in development expenditure juxtaposed against an expected budget deficit in the Singapore government?

We see it as a sustainable effort to be prudent on the Singapore reserves. Attracting more external funding sources helps free the government’s budget for other packages supporting businesses and citizens impacted by pandemic. The government guaranteed infrastructure bonds will not only help budget sustainability, but also help reduce the cost of funding for the bond issuers, some we expect are statutory boards receiving funding from the Ministry of Finance budget as well.

Do you think there will be enough appetite among investors to soak up this instrument, on top of the usual Singapore Government Securities; why? Will they be more of retail or institutional investors?

We think there will be demand for the bonds given they are longer-tenor SGD bonds that allow investors to match longer-term SGD liabilities. Also, we expect longer-tenor bonds to pay higher yields than equivalent shorter-tenors, thus providing a pool of higher yielding high-quality SGD bonds to attract investment. We’re likely to see most demand from pension funds such as the CPF and from insurers, which we see make the largest proportion of investments in existing statutory board bonds.

We understand that these bonds will be priced along the same yield curve as the current SGS bonds – what kind of yield does this mean for 10- to 20-year bonds?

Existing SGS bond yields are priced at 10-year – 1.062%, 15-year – 1.373%, and 20-year – 1.457% (as of Fed 2021). Existing HDB bond spreads range from 30bps to 45bps over SGS bond yields. If we assume the lower range, the new 20-year government guaranteed bond could be priced at around the 1.65% area.

What impact is this expected to have on the Singapore bond market?

The overall effect is positive for the Singapore bond market. For one, government-linked infrastructure sector bonds could see their yields compress with the government’s explicit guarantee. These include statutory boards and government-linked infrastructure company bonds, and also bonds of issuers that win contracts for new government infrastructure projects. Also, potential attracting of new interest from foreign investors will help with more efficient pricing and liquidity for our local bond market.

What will this mean for demand: who will be the likely parties subscribing for them? Will there likely be any interest for retail investors?

We will likely see demand mostly from pension funds and insurers. The anticipated longer tenures of SINGA bonds and their low yields may cause retail investors to seek higher returns elsewhere. Retail investors who are non-Accredited Investors may find wholesale bond denominations of S$250k relatively inaccessible as well. There is no indication of the bond structures yet. More retail participation can be encouraged with smaller lot sizes like current SGS bonds with minimum size of S$1k.

Any thoughts on the way they’re structured: Was this expected? Would it have been better to have had a differently structured product? Why, or why not?

We do not yet observe any structure guidance for the SINGA bonds. Assuming they’re structured like current SGS bonds, which are straight bonds that have a fixed maturity date and coupon rate, this is a relatively safe structure as compared to, for example, perpetual bonds that do not have a fixed maturity date. The way the bonds are structured also depends on investor appetite. Structuring the SINGA bonds as straight bonds, which is a safer structure, will more likely fit more institutional investors safety criteria and attract the most investments.

Since the 2018 budget, has the government has indeed been offering guarantees for long-term borrowings by statutory boards and government-owned companies to build critical national infrastructure? How has demand/response been so far?

There has been no explicit guarantee by the Singapore Government for statutory and government-owned companies for infrastructure. However, statutory boards HDB PUB and LTA are funded in the national budget and are approved by the Minister for Finance. For example, HDB deficits are fully financed by government grants and government loans made up 61% of HDB’s interest-bearing debt as of March 2020. We see demand from institutions rather than retail investors due to the low bond yields.

Related Articles

Groupe BPCE 5% 10NC5 Tier 2 SGD

Groupe BPCE recently announced the issuance of its 10NC5 Tier 2 notes at a final price guidance of 5%.

Shawn Sng  |   27 Feb 2024

HSBC – Growth supported by higher rates

In FY202, HSBC growth was supported by higher rates and has reported a growth in its revenue of 30% YoY

Shawn Sng  |   23 Feb 2024

UBS Group 5.75% NC5.5 AT1 SGD

UBS Group recently announced the issuance of its NC5.5 Additional Tier 1 perpetual notes at 5.75%.

Shawn Sng  |   16 Feb 2024


These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the "Research") contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.

Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you


This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

This advertisement has not been reviewed by the Monetary Authority of Singapore.  


Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
Tel: (65) 6230 8133 Fax: (65) 65383066