THE first ever auction of 30-year Singapore government bonds drew solid demand, gaining slightly in the secondary market after the auction closed within market expectations.

The $2.1 billion offering of 2.75 per cent bonds was priced at a cut-off yield of 2.84 per cent after receiving bids for 2.26 times the amount of debt offered.

Analysts polled by BT had been eyeing a yield of 2.8 to 3 per cent.

‘Good auction with good bid-to-cover ratio of 2.2 times,’ said OCBC Treasury Research head Selena Ling. ‘The cut-off yield was also within our 2.8 to 2.9 per cent range.’

Ho Tiong Sang, managing director of Treasury and Markets at DBS, said indicative yield on the bonds had slipped to about 2.81 per cent near the close of the day. Bond yields fall as prices increase.

The bonds will settle on April 2.

‘The auction went very well,’ Mr Ho said. ‘I think it’s time that MAS extended this bond curve to 30 years. A lot of insurance companies like these bonds. It’s a quality issue.’

The Singapore government issues debt mainly to help develop the country’s bond markets, because government debt offers a critical pricing benchmark for other bonds.

The 30-year bond was seen as a way to create a reference at the long end of the yield curve. The market had been using Temasek Holdings’ 30-year issue, which offers a yield of about 4 per cent, as the previous benchmark.

‘If someone wants to price something out there, (the new bond is) a good benchmark,’ Mr Ho said.

Insurance companies were seen as the main drivers for demand of the new paper.

‘A large part of this auction will be taken up by local insurers with banks also likely to pick up a small amount for market making purposes,’ Deutsche Bank strategist Arjun Shetty wrote in a March 15 report ahead of the auction.