New deal: Housing and Development Board D S$700M 10Y at 2.162%

New deal: Housing and Development Board D S$700M 10Y at 2.162%

In a day marked by significant market movements, government bonds experienced a notable recovery on Tuesday, as short covering operations helped to stabilize yields. The benchmark 10-year government bond closed at 6.60 per cent, a flat figure compared to Monday's closing price, despite a brief surge to 6.66 per cent due to high supply at the state bond auction [1].

Dealers attributed the recovery to short covering, a process where investors who had previously sold bonds short (without owning them) buy back the bonds to close out their positions. This buying activity helps to reduce the supply of bonds for sale and can lead to an increase in bond prices and a decrease in yields.

The state bond auction saw a weak demand, with only Rs 28,892 crore raised compared to a planned Rs 34,150 crore. This oversupply, combined with fading hopes of further policy rate cuts and proposed GST reductions, has contributed to higher yields [1]. The yield on 10-year state bonds rose to a range of 7.27–7.49 per cent, while the 10-year state development loan (SDL) yield widened to 80 basis points [1].

Despite a 100 basis point reduction in the policy repo rate since February, bond yields have surged across the board. Factors such as oversupply of long-duration bonds and short positions by investors have pushed yields higher over the past couple of months [1].

In a separate development, the Housing and Development Board (HDB) announced a new deal, issuing $700M of 10-year bonds at a yield of 2.162 per cent. This deal is part of the HDB's strategy to finance its housing development projects and is expected to provide investors with a stable return [2].

References:
[1] https://www.business-standard.com/finance/news/government-bonds-recover-losses-short-covering-sdl-yield-spread-widens-125082601367_1.html
[2] https://www.hdb.gov.sg/news/press-release/new-deal-hdb-ds700m-10y-at-2-162