Singapore Exchange (SGX) hosted its largest number of new bond listings for 2014 in April with 56 issues introduced in the month, up 40 per cent from March and beating this year's previous high of 44 in January.
Many of the new listings were driven by growing interest in variable rate bond structures.
April's listings continued the flurry of issuance seen in the March quarter, which was briefly interrupted in February on concerns about Asian growth.
Foreign issuers accounted for 75 per cent of April's total while US dollar issuance made up 68 per cent.
The global bond market more broadly is in a transition phase as the Federal Reserve winds down its quantitative easing program, signalling a shift away from its extremely accommodative monetary policy. Having benefitted from the historically low interest rate environment over the past few years, bond issuers seem to be considering transaction structures that help investors mitigate the risks of rising interest rates.
A significant portion of new SGX bond listings in March and April came through floating rate note structures. In these two months, floating rate notes accounted for 25 per cent of new bond listings in March (10 bonds with SGD4.19 billion raised) and 18 per cent in April (10 bonds with SGD2.68 billion raised) compared with seven per cent in April a year earlier (three with SGD0.75 billion).
All these bonds were primarily issued by Asian banks, predominantly in US dollars and in short tenors of up to three years. As the market moves away from a "zero interest rate" environment, bond investors will increasingly seek instruments that can deliver higher yields if and when interest rates rise. Floating rate notes tend to perform better than plain-vanilla bonds under these conditions and the best time to buy these instruments is while interest rates are still low.
SGX's fixed income market is organised into two main segments: the retail bond market and the wholesale bond market. SGX-listed retail bonds are offered to the public and traded on the exchange's Mainboard in much the same way stocks are. SGX-listed wholesale bonds are only distributed to institutional or accredited investors in larger denominations and are primarily traded over-the-counter.