IDBI Bank Ltd. (IDBI)’s record Singapore- dollar bond sale will prompt more Indian companies to tap increasing demand from wealthy private investors, the city’s top underwriter said.
The Indian state-owned lender sold S$250 million ($200 million) of three-year notes to yield 3.65 percent, in the first offering by an Indian issuer in the currency since April 2011, according to data compiled by Bloomberg. The average yield on Singapore dollar corporate debt declined 32 basis points this year to 2.6 percent, HSBC Holdings Plc indexes show. Three-year rupee company borrowing costs are 9.46 percent, according to data compiled by Bloomberg.
“IDBI’s bond shows the continued diversification of issuer types in Singapore’s bond market,” Clifford Lee, head of fixed income at DBS Group Holdings Ltd., the biggest arranger of the debt this year, said yesterday. “It does a lot for price discovery for Indian banks in the market and will definitely lead to other issuers following suit.”
Indian borrowers are returning to the overseas markets as yield premiums narrow. They sold the most U.S. dollar debt last week in more than a year, according to data compiled by Bloomberg. Singapore dollar bond sales are set to increase to an all-time high this year as a 4.3 percent rally in the currency increases the appeal of the assets to private-wealth clients. Private banks bought 65 percent of IDBI’s notes, a person familiar with the matter said.
The underwriters took more than $3 billion of orders from 80 accounts for the offering, the person said, asking not to be identified because the matter is private. About 78 percent of the buyers were based in Singapore, according to the person.
The sale was managed by DBS, HSBC and Standard Chartered Plc, according to data compiled by Bloomberg.
“It’s a way to diversify their funding sources and demand from private banks for these securities is strong,” said Joyce Tan, co-head of Asia fixed-income investments at UOB Asset Management Ltd., which manages the equivalent of $15.5 billion of assets. “There is less competition for funds relative to U.S. dollar market so the borrowing costs for foreign issuers can be cheaper here.”
Singapore’s dollar strengthened 0.3 percent to S$1.2437 against the dollar today, taking gains since 2009 to about 16 percent.
Yuan, Swiss francs
IDBI issued the first Dim Sum bond for an Indian issuer in November 2011. The bank priced 650 million yuan ($102 million) of three-year notes at a yield of 4.5 percent in November, the data show. It also sold 110 million Swiss francs ($115 million) of 3-1/2-year debt in March.
Melwyn Rego, executive director of IDBI in Mumbai, wasn’t immediately available to comment on the latest sale.
Elsewhere in the markets, the yield on India’s 8.15 percent note due June 2022 was little changed at 8.22 percent as of 10:14 a.m. in Mumbai, according to the central bank’s trading system. Benchmark yields touched 8.26 percent on Aug. 16, the highest since June 11, on concern the fastest inflation among the largest emerging-market nations will deter the central bank from easing monetary policy.
The extra yield on 10-year bonds over similar-maturity Treasuries was little changed at 653 basis points.
Rupee-denominated sovereign notes returned about 5.94 percent this year, lagging only the 6.35 percent earned by Indonesian debt among the region’s biggest markets, HSBC indexes show.
India’s rupee gained 0.4 percent to 55.2650 against the dollar today, according to data compiled by Bloomberg. The currency has strengthened about 3.7 percent since weakening to a record low of 57.3275 on June 22, the data show.
State Bank of India, the nation’s largest lender, resumed currency trading today after a halt yesterday as a strike by workers of state-owned banks disrupted operations, a person familiar with the matter said.
Credit-default swaps on State Bank, which investors consider a proxy for the sovereign, fell 3 basis points to 319 this month as of Aug. 22, heading for a third monthly decline, according to data provider CMA. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to debt agreements, and a drop indicates improving perceptions of creditworthiness.
Steel Authority of India Ltd., National Housing Bank and Indian Renewable Energy Development Agency Ltd. are planning to sell rupee-denominated bonds, according to people familiar with the matter.
IBDI’s bond is the first by an Indian issuer since ICICI Bank Ltd. sold S$60 million of 3.8 percent five-year notes in April 2011, according to data compiled by Bloomberg.
“Indian banks are looking to diversify to non-dollar currencies,” Harihar Krishnamoorthy, Mumbai-based treasurer at FirstRand Ltd. said in phone interview on Aug. 21. “Given the economic uncertainties in the world, it’s always ideal for banks to get exposure to different currencies.”
Singapore-dollar bond issuance increased 66 percent to S$23.2 billion this year, according to data compiled by Bloomberg. Private banks took up about 35 percent of Singapore- dollar notes this year on average, Deutsche Bank AG estimated in June.
Private wealth in the city-state, which has the top ratings from both Standard & Poor’s and Moody’s Investors Service, grew 8.2 percent in 2011, according to research by Boston Consulting Group, outpacing the 1.9 percent global pace. Total household wealth in Singapore is estimated to grow to $1.4 trillion in 2016 from $1 trillion in 2011, the study showed.
“There are a lot of wealthy non-resident Indians living in Singapore, which definitely added to the deal’s response,” James Fielder, head of Asia local currency syndicate in Hong Kong at HSBC, said in a telephone interview on Aug. 21. “Given the popularity of IDBI’s deal, I certainly expect many more bond origination teams to be pushing the idea to their clients.”