Temasek’s 2nd bonds in two months see yield spreads narrow

Katrina Nicholas & John Detrixhe

The yield spread on Temasek Holdings Pte’s second new bonds in two months narrowed on investor demand for sovereign debt in Asia.

Singapore’s government-owned investment company sold $500 million of 5.375 percent bonds due in 2039 that were priced to yield 115 basis points more than similar-maturity U.S. Treasuries, according to a stock exchange filing today. Temasek is rated Aaa, the top investment-grade by Moody’s Investors Service. The spread shrank to 110 basis points as of 10:05 a.m. in Singapore, Deutsche Bank AG prices show.

“Chief Executive Ho Ching has said they want to create a benchmark curve for Temasek as a barometer for risk,” Desmond Soon, who helps oversee about $20 billion of assets at DBS Asset Management in Singapore, said in a phone interview. “Investors don’t have a strong preference for Temasek, but their bonds have performed rather well, in line with the market.”

Temasek sold its first bonds in four years on Oct. 20, pricing the $1.5 billion of 10-year debt to yield 95 basis points more than similar-maturity U.S. Treasuries. Those notes last traded at a 76 basis point spread, according to Rabobank Nederland NV prices.

“Credit has outperformed substantially this year and emerging-market sovereign Asian bonds in particular have done extremely well,” Soon said.

Temasek said in May that it wanted to establish a “series of different tenured bonds for a more robust and nuanced signal over the longer-term.”

The company updated its charter in August, the first time in seven years, reflecting a switch from a passive owner of stakes in government-controlled companies to an investor with more than two-thirds of its assets outside Singapore.

Temasek intends to use proceeds from the 2039 bond sale for general working capital, and the sale offer closes on Nov. 23, it said in today’s statement.

Deutsche Bank, Goldman Sachs Group Inc. and Morgan Stanley were hired to help with the sale, according to a person familiar with the transaction.

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