Singapore Savings Bonds: What you should know

This story, first published on March 31, 2015, was updated on July 21, 2015.

What are Singapore Savings Bonds?

They are a new type of government bond, which will be launched as part of moves to make low-cost investment options more widely available to retail investors.

A feature of the product is that a bondholder can get his money back in any month, with no penalty imposed. This means investors do not have to decide upfront the duration of their investment.

Normally bonds have a set interest rate and investors can find themselves out of pocket if they redeem them too early.

 

Singapore Savings Bond interest rates will be linked to the long-term Singapore Government Securities (SGS) rates. But unlike SGS bonds, which pay the same interest rates every year, the new product will start with smaller interest rates that will keep rising, the longer you hold on to the bond.

When will they be available?

The bonds will be issued monthly, starting from Oct 1, 2015. Interested parties can start applying for them on Sept 1, 2015.

How do I buy them?

You can apply for and redeem the bonds at the ATMs of DBS Bank/POSB, OCBC Bank or United Overseas Bank, or via DBS/POSB Internet banking. 

Applications and redemption requests must be made in multiples of $500, and using cash. You will need a bank account with a participating bank and a Central Depository securities account with direct crediting service, to allow the bond payments to be made directly to your bank account.

How much can I invest?

The bonds are targeted at small retail investors with a minimum investment of just $500 with additional multiples of $500 up to a $50,000 cap on any single issue.

How much returns will I get?

Interest on the bonds will be linked to long-term Singapore Government Securities (SGS) rates. While SGS bonds pay the same interest every year, Singapore Savings Bonds will pay coupons that step up over time.

The average interest investors will receive over the period they hold Singapore Savings Bonds will match what they would have received had they bought an SGS bond of equivalent tenure.

This means that if you hold your Savings Bond for the full 10-year term, the average interest per year on your investment will match the return if you had invested in a 10-year SGS bond.

The 10-year SGS has mostly yielded between 2 and 3 per cent over the past 10 years.

Singapore Savings Bonds will be issued monthly and the interest rate schedule for each issue will be announced before applications open.

I would rather invest in Singapore Government Securities (SGS). How do I do that?

Individual investors must have an existing individual Central Depository (CDP) account to invest in SGS.

The minimum denomination to purchase SGS is $1,000, and you can invest in multiples of $1,000.

SGS are issued to the market via auctions. You may purchase SGS at primary auctions or in the secondary market.

For more information, visit http://www.sgs.gov.sg/