INVESTORS have reportedly pounced on a $1.5 billion sale of bonds by Temasek Holdings - its first such offering since 2005.

One report said the issue had sold out within hours with orders for US$4 billion (S$5.5 billion) worth of the 10-year bonds from around the globe far exceeding what was on offer.

Temasek offered a coupon of 4.3 per cent - the annual interest rate paid on the bond - which is nearly 1 percentage point better than for US Treasuries.

Both Temasek bonds and US Treasuries, government-backed bonds, are regarded as rock-solid safe investments. Temasek said the proceeds would be used to fund the ordinary business of the investment agency and its units.

Although the offer may be sold out, it is scheduled to close on Oct 26. The notes are set to be listed the following day.

Temasek said in a statement: 'The issuer intends to provide the net proceeds from the offering to Temasek and its subsidiary companies to fund their ordinary course of business.'

The notes will be issued by its wholly-owned subsidiary Temasek Financial as part of its US$5 billion medium-term note programme. They will be fully and unconditionally guaranteed by Temasek.

This is the second time Temasek has tapped the bond market. The first - for US$1.75 billion due in 2015 - was issued in 2005 at a 4.5 per cent coupon rate. The earlier bond issue was part of Temasek's measures to instil discipline. It also has an annual Temasek Review, which began in 2004, and credit ratings with two leading international agencies.

Temasek enjoys top investment-grade ratings from Moody's Investors Service and Standard & Poor's (S&P), and had a portfolio of $172 billion as of July 31. The notes have been rated AAA by S&P and AAA by Moody's.

Moody's said: 'Despite the inevitable volatility shown in the net market value of Temasek's portfolio, the company has maintained overall strong financial strength and prudence.'

The ratings agency added that its AAA rating reflected Temasek's strong financial profile at the holding company level. The rating is also underpinned by Temasek's low level of leverage, excellent liquidity position and the fundamental strength of its underlying portfolio.

BNP Paribas credit trader Prashant Pandey told Bloomberg News: 'It's a triple-A credit and so anyone looking for a less risky asset would be interested in it.'

A fixed income analyst told The Straits Times: 'Investor reaction should be good. It's quite attractive pricing for 10-year bonds, considering the dislocation in the credit markets in the last few months.'

According to Thomson Reuters service IFR, Temasek's bonds were priced at 0.95 percentage point over comparable US Treasuries. Earlier market talk had suggested the price would be about 1 percentage point over Treasuries.

The bond offering has attracted strong investor interest, with unconfirmed reports saying that Temasek sold the bonds overnight. Data compiled by Bloomberg and a Reuters report said the issue has received US$4 billion of orders.

A Reuters report said the issue was allocated mainly to US investors, who took 62 per cent. Asia accounted for 25 per cent, with Europe the rest. By investor type, funds accounted for 43 per cent, insurance and pension funds 25 per cent, central banks 13 per cent, commercial banks 12 per cent and retail investors 7 per cent.

alfoo@sph.com.sg