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Articles>All you need to know about Singapore Government Bonds


ALL YOU NEED TO KNOW ABOUT SINGAPORE GOVERNMENT BONDS

Investors are spoiled for choices on which Singapore Government bonds to invest
in. We break down the various products offered by the Singapore Government, so
you can decide which is best suited for your investment profile.


by
Lim Teng Chong
Published on 05 Oct 2022 • 5 min(s) read


Receive first-hand news on the latest bond issues, credit updates and special
events when you join us on our Telegram channel at #!

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SGS BONDS

The Singapore Government Securities Bonds (“SGS Bonds”) are bonds that are fully
backed by the Singapore Government. The bond has the strongest credit rating of
AAA by major credit agencies. The SGS bonds pay a fixed interest rate with
maturities between 2 to 50 years.

There are three different categories of SGS bonds – 1) SGS (Market Development),
2) SGS (Infrastructure) and 3) Green SGS (Infrastructure).

The key differences between the three types of SGS bonds would be the
legislation that the SGS bond is issued under and its use of proceeds.

For investors who wish to invest in a safe asset between 1-2 years, the SGS
bonds are suitable as it provides more yields as compared to the SSB. As of 4
October 2022, the yield for the 2 year SGS bond is around 3.39%. Even though
there is a fixed maturity date for the SGS bonds, investors can still trade
bonds on the secondary market. Investors may trade SGS bonds through an SGX
broker. 

One of the risks in buying SGS bonds is that the bonds are subjected to
fluctuations in secondary market pricing. The value of the bond may be lower
than its par value which may incur additional losses when sold before its
maturity date. When interest rates rise, it will negatively impact a bond’s
price, thus we think the SGS bonds are suitable for investors who are able to
hold a short-term SGS bond till maturity.



         

SGS (Market Development)

SGS (Infrastructure) 

Green SGS (Infrastructure)

Legislation

Government Securities (Debt Market and Investment) Act 1992         

Significant Infrastructure Government Loan Act 2021 (SINGA)

Significant Infrastructure Government Loan Act 2021 (SINGA)

Objective

To develop the domestic debt market 

To finance major, long-term infrastructure

To finance major, long-term green infrastructure projects

Tenor

2, 5, 10, 15, 20, 30, or 50 years

Frequency of issuance

Monthly, for at least 5 years

Minimum investment amount

SGD 1,000, in multiples of SGD 1,000

Maximum investment amount

Up to the allotment limit for auctions

Buy using SRS and CPF funds?

CPF and SRS

Interest payment

Every 6 months, starting from the month of issue

Secondary market trading

Yes




T-BILLS

Treasury bills, or T-bills, are short-term Singapore Government Securities.
T-bills are available in short-tenors of 6 months and 1-year. Unlike the SGS
bonds, T-bills do not have interest payments but are issued at discount to its
face value. Upon maturity, T-bills will be redeemed at its face value of 100.

For investors who wish to park their cash in a safe asset for a short period of
time, the SGS T-Bills are suitable as it provides decent yields for only a short
6 months or 1 year period. It is also suitable for investors who are undecided
and would like to wait out the volatility and uncertainty in the markets. As of
4 Oct 2022, the cut-off yield for the latest 6-month T-Bill auction was 3.32%
which is a much better alternative to fixed deposits and bank deposit rates. 

SGS T-Bills

Tenor

6 months or 1-year

Frequency of issuance

Quarterly

Minimum investment amount

SGD 1,000, in multiples of SGD 1,000

Maximum investment amount

Up to the allotment limit for auctions

Buy using SRS and CPF funds?

SRS and CPF

Interest payment

N/A

Secondary market trading

Yes




SINGAPORE SAVINGS BONDS

The Singapore Savings Bonds, or SSBs for short, are a special type of Singapore
Government Securities. It has a tenor of up to 10 years and is issued monthly.
Interest rates for the SSBs are determined based on the yield to maturity of the
corresponding SGS bond. For example, the 5-year average return on the SSB should
be equal to the yield of the 5-year SGS bond.

One unique feature of the SSB is that it gives investors increasing returns the
longer you hold the SSB. Interest rates for the SSBs will “step-up” every year
for as long as you hold the bond. This results in the total average returns of
the SSB to increase each year as the next interest payment will be higher than
the previous one.

In the event where short-term rates are higher than long-term rates (an inverted
yield curve), MAS will apply adjustments to ensure that the coupons on the SSBs
do not step-down at any point in time. MAS will ensure that the average 10-year
return of the SSB (when held to maturity) will always equal to the yield of the
10-year SGS bond.

Another unique feature the SSB provides is the flexibility to redeem the bond at
any point in time (during the tenor of 10 years). At any point in time, holders
of the SSB can redeem their SSB and receive in full principal amount (including
accrued interest) by the second business day of the next month.

SSBs are suitable for investors who wish to enjoy flexibility in their
investments. There is no fixed tenor for the SSB, so investors can decide when
to redeem the bond. Additionally, the SSB is not affected by secondary market
trading which ensures less volatility in the bond. With that in mind, the lack
of secondary market trading also removes the ability to earn capital
appreciation in the bond when interest rates fall.






Singapore Savings Bonds

Tenor

Up to 10 Years

Frequency of issuance

Monthly, for at least 5 years

Minimum investment amount

SGD 500, in multiples of SGD 500

Maximum investment amount

SGD 200,000 overall

Buy using SRS and CPF funds?

Only SRS

Interest payment

Every 6 months, starting from the month of issue

Secondary market trading

No


We think that in a time where yields are high coupled with volatility in the
markets, investors should consider adding some safer assets such as Singapore
Government Securities. To find out more, you can listen to our podcast series on
SGS vs SSB and watch our video series on why you should add government bonds in
your portfolio.













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All Contents here in do not constitute financial advice or formal recommendation
and must not be relied upon as such. Bondsupermart and its Information Providers
are not giving or purporting to give or representing or holding ourselves out as
giving personalised financial, investment, tax, legal and other professional
advice. Please read our full Terms and Conditions section on the website

--------------------------------------------------------------------------------

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