In the Singapore dollar credit market, there are $19.0 billion of outstanding callable bonds, making up 25% of the total outstanding bonds using the same basis. These callable bonds are mainly Tier 2 bank capital instruments. If we also include perpetual issuances (e.g. Additional Tier 1 bank capital instruments, non-financial corporate perpetuals) which are a common feature in the Singapore dollar credit market, the outstanding papers with call option total $44.0 billion.
A call option grants the issuer the right (but not the obligation) to carry out an action. If the right is not exercised, the option lapses. Call options can be thought of as a “right to buy” — that is, for the case of a standard vanilla callable bond, the issuer has the “right to buy” the bond back from the investor at a predetermined price. The investor has no right to counteract the call when exercised and would no longer own the callable bond after it is redeemed.
Based on our tabulation using Bloomberg data, there are US$654.9 billion ($900.2 billion) of outstanding US dollar-denominated callable bonds in the Asia Pacific region, making up 37% of the total outstanding bonds (excluding perpetual issuances which are issues with no legal maturity date).
