An auction of benchmark 20-year Singapore government bonds was oversubscribed and fetched a cut-off yield of 2.91% on Friday, well within market expectations.

The Monetary Authority of Singapore said $4.118 billion worth of bids were received in the auction for $2 billion of bonds.

 

MAS itself took $200 million of the paper.

 

“It suggests buyers are comfortable with 20-year duration at sub-3% handle, probably reflective of the benign inflation and slow growth environment and also preference for SGD-denominated assets,” said Selena Ling, head of treasury research at OCBC Bank.

 

“I think this is fairly in line with my expectations,” she added. "We were expecting around 2.9-3%."

 

Singapore consumer prices rose a greater than expected 3.1% in July from a year ago, but economists said the increase was largely driven by soaring car prices. If car prices were taken away, inflation remains benign, they said.

 

“It was a very strong auction and shows investors’ demand for long end bonds and their preference for long duration at this juncture,” said Pin Ru Tan, strategist with Royal bank of Scotland.

 

Other analysts agreed.

 

“The bid to cover ratio at 2.06 is strong compared with the historical average of 1.8-2.0 times,” said Thio Chin Loo, senior forex strategist at BNP Paribas in Singapore.

 

“I expect it to trade at around 2.91-2.88% at the open.”