Singapore - A new type of government bond will debut here as part of a move to make low-cost investment options more widely available to retail investors.
The Singapore Savings Bonds (SSBs) will be launched by the government, Senior Minister of State for Finance and Transport Josephine Teo announced at an investment industry event on Thursday.
She said the SSB will be safe investments that are principal-guaranteed by the government, which means the initial outlay is protected.
A feature of the new product is that a bond-holder can get his money back in any month, with no penalty imposed.
This is unlike conventional bonds where an investor who sells the bond before maturity is exposed to the price risk based on the prevailing market price and may get less than the principal amount.
Mrs Teo said the feature means investors do not have to decide upfront the duration of their investment.
Other than the no-penalty feature, SSBs will pay higher coupons if the bonds are held for longer periods, unlike conventional bonds that pay the same coupon each year.
"The Singapore Savings Bonds will offer the higher returns of a long-term bond and give what investors call a 'term premium', while retaining the flexibility of a shorter-term deposit, and the safety of an instrument guaranteed by the Government," said Mrs Teo at the Investment Management Association of Singapore's 16th annual conference.
"As the name suggests, we hope that the Singapore Savings Bond programme will encourage individuals to save and invest to meet their long-term financial goals and retirement needs."
The Government and the Monetary Authority of Singapore (MAS) are working on the details of the SSB programme and will release more information.
Besides the SSBs, MAS will make it easier for retail investors to access more exchange-traded funds (ETFs).
MAS will amend its excluded investment products (EIP) definition next month to allow less risky or complex ETFs that make limited use of derivatives as EIPs.
Many ETFs are classified as special investment products (SIPs) now, limiting the availability to retail investors as those who want to invest in SIPs must first be assessed for their level of investment knowledge.
To make more plain vanilla corporate bonds more available to retail investors, the government will also provide a tax deduction of up to two times the issuance costs that firms incur under the upcoming bond seasoning framework and the exempt bond issuer framework.
Both frameworks aim to reduce the financial and administrative costs to issuers who make their bonds available in the retail market.