UPDATE 1-Singapore ST Engg to sell 10-yr dlr bonds -source

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HONG KONG, July 9 (Reuters) - Singapore Technologies Engineering (STEG.SI) will sell 10-year dollar bonds at around 160-170 basis points over U.S. Treasuries, a source close to the deal said on Thursday.

It is a rare AAA-rated corporate offshore bond deal out of non-Japan Asia. According to Thomson Reuters data, the last deal with a top rating was in 2006 from Singapore's PSA Corp, which was rated Aaa by Moody's Investors Service.

The deal is being managed by Deutsche Bank and Morgan Stanley.

The issue, done via its wholly-owned subsidiary, ST Engineering Financial I Ltd, will be of a benchmark size.

Singapore Technologies Engineering, in which state investor Temasek Holdings [TEM.UL] has more than a 50 percent stake, has been rated AAA by Standard & Poor's.

"The AAA rating on STE reflects Standard & Poor's opinion that there is an extremely high likelihood that the government of Singapore would provide timely and sufficient extraordinary support to STE in the event of financial distress," the agency said.

On Monday, the engineering conglomerate said it aimed to raise $1.2 billion worth of medium-term notes in various currencies to fund future investments, including acquisitions and debt refinancing. (Reporting by Saeed Azhar and Umesh Desai; Editing by Neil Fullick)