Developing a Viable Corporate Bond Market: The Singapore Experience

Since August 1998, Singapore has actively encouraged the development of the Singapore dollar corporate bond market. As a result, this market has shown phenomenal growth, with participation from a wide range of issuers: foreign entities, statutory boards, government-linked companies and local corporations. Although Singapore has consistently run fiscal surpluses, it continues to issue large amounts of government debt securities to develop the necessary benchmark yield curve for the pricing of Singapore dollar corporate bonds. Thus far, Singapore has made excellent progress in its effort to build a viable corporate bond market. Going forward, Singapore has to contend with the pervasive "original sin" problem, which is the inability to attract non-residents to invest in local currency bonds. In fact, the long-term prospect for its corporate bond market hinges critically on how well the city-state addresses the causes that can lead to the "original sin" problem. The Singapore experience offers many useful lessons for countries striving to develop their corporate bond markets.