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Issuing limits raised for Singapore government securities and treasury bills

Issuing limits raised for Singapore government securities and treasury bills

Source: Business Times
Article Date: 06 Jan 2021
Author: Janice Heng

The proceeds from such issuances are invested, not for government spending.

The issuing limits for government securities and treasury bills have been raised to meet Central Provident Fund (CPF) needs and cater to growing investor demand, with Parliament voting to authorise this on Tuesday.

A new tool will also allow the ad-hoc issuing of treasury bills for short-term cash flow management.

The government may now borrow up to S$960 billion via the issuance of government securities, an increase of S$270 billion from the previous S$690 billion limit.

It is may also issue up to S$105 billion in treasury bills, an increase of S$45 billion from the previous S$60 billion limit. The new limits are expected to last five years, till 2025.

In moving the motions in Parliament, Second Minister for Finance Lawrence Wong said these increases "are for specific market development and operational-needs purposes, and not to cover the government's fiscal shortfall". Proceeds from such issuances are invested, not used for government spending. Under the Government Securities Act and Local Treasury Bills Act, there are limits - authorised by Parliament - on the amount of government securities and treasury bills, respectively, that can be issued.

The government has already utilised the earlier treasury bills limit, and expects to utilise the earlier government securities limit before the middle of this year. There is thus a need to raise these limits, to cater to growing demand over the next five years, said Mr Wong.

Government securities are issued for specific purposes. Singapore Government Securities (SGS) are issued to develop the domestic debt market and provide financial institutions with high-quality liquid assets to meet regulatory requirements; Special Singapore Government Securities (SSGS) are non-tradable bonds issued primarily to meet the investment needs of the CPF; Singapore Savings Bonds are issued to provide a long-term savings option for individuals.

Treasury bills are issued to grow the domestic short-term debt market and meet market demand for short-term rated Singapore dollar instruments.

The last time motions were moved to increase the issuance limits were in November 2016 for government securities, and August 2007 for treasury bills. In 2016, the raising of the ceiling to S$690 billion had been expected to last five years till 2022.

Mr Wong said that the government now projects that the outstanding amount of government securities will reach S$960 billion by the end of 2025. About 74 per cent of the S$270 billion increase is expected to be issued to the CPF as SSGS to meet its investment needs, he said.

The remaining 26 per cent of the increase is for the issuance of SGS, to support the continued development of this market and meet demand.

There has also been a rise in investor demand for treasury bills; issuing more bills will help meet this, he said. "We will continue to monitor the market demand for both government securities and treasury bills, and will increase the rate of issuance to meet this demand, if necessary."

The increased limit for treasury bills also takes into account a new short-term cash-management tool, under which treasury bills can be issued on an ad-hoc basis to meet temporary cash flow mismatches.

The Cash Management Treasury Bills programme is expected to have a maximum total size of up to S$10 billion. Its tenor will be tailored to the period of need and be less than six months, as it will be issued solely for short-term cash flow management.

Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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