Singapore Savings Bonds: First issue open for application

The MAS plans to issue a total of $2 billion to $4 billion of Singapore Savings Bonds this year in three tranches. They will then be issued monthly for at least the next five years.
The MAS plans to issue a total of $2 billion to $4 billion of Singapore Savings Bonds this year in three tranches. They will then be issued monthly for at least the next five years.PHOTO: AGENCE FRANCE-PRESSE

$1.2 billion worth of bonds available with promise of 2.63% average annual return over 10 years

The first issue of Singapore Savings Bonds (SSB) opened for application yesterday with an average annual return of 2.63 per cent promised for those who hold the instrument for the full 10-year tenor.

There are $1.2 billion worth of bonds in the first issue, which closes for applications at 9pm on Sept 25. Successful applicants will be notified by letter after the allotment results are announced on Sept 28.

The interest rate - or rate of return - of the first issue starts at 0.96 per cent for the first year, rising to 1.09 per cent in the second year and 1.93 per cent in the third. This gives an average annual return of 1.32 per cent over three years.

Unlike regular bonds, the Singapore Savings Bonds offer accrued returns to investors who redeem the bonds ahead of the full 10-year tenor. As the bonds are not tradable, they are not affected by market fluctuations and are hence capital-guaranteed.

The rates will be stepped up over subsequent years, reaching 3.7 per cent for the tenth year, giving an average annual return of 2.63 per cent.

So the longer the bonds are held, the better the return.

A $10,000 investment, for example, will give a return of $96 in the first year, a further $109 in the second year, and so on. If you hold this amount for the 10 years, you will reap a total return of $2,691.

Returns are paid out every April and October.

The first issue rates were calculated from the average Singapore Government Securities interest rates over August, said the Monetary Authority of Singapore (MAS) yesterday.

Mr Wong Sui Jau, Fundsupermart retirement planning ambassador, told The Straits Times: "These rates are actually quite competitive compared with the one-year and 10-year government bonds. But more importantly, for retail investors, they offer the flexibility to redeem early without penalty."

Unlike regular bonds, the Singapore Savings Bonds offer accrued returns to investors who redeem the bonds ahead of the full 10-year tenor. As the bonds are not tradable, they are also not affected by market fluctuations and are hence capital-guaranteed.

People can apply in multiples of $500 up to a maximum of $50,000 in a single issue, but they will need an individual Central Depository securities account complete with direct crediting service.

Applications can be lodged through ATMs of DBS, POSB, OCBC and UOB, or through Internet banking services of DBS and POSB. More banks may be included as the programme progresses.

The MAS plans to issue a total of $2 billion to $4 billion of Singapore Savings Bonds this year in three tranches. They will then be issued monthly for at least the next five years, so there is no need to rush.

A version of this article appeared in the print edition of The Straits Times on September 02, 2015, with the headline 'Singapore Savings Bonds: First issue open for application'. Print Edition | Subscribe