MAS to issue up to S$4 billion of Savings Bonds in 2016

The Monetary Authority of Singapore (MAS) headquarters.
The Monetary Authority of Singapore (MAS) headquarters. PHOTO: BLOOMBERG

SINGAPORE - The Monetary Authority of Singapore will offer up to S$4 billion worth of Singapore Savings Bonds next year, starting with the January issue of up to S$300 million, the central bank announced on Tuesday (Dec 1).

Investors can now start applying for the January bonds before the application deadline at 9pm on Dec 28.

For the upcoming issue, the coupon rate - or interest return - will start at 1.21 per cent for the first year, rising to 1.31 per cent in the second year and 1.92 per cent in the third. This gives an average annual return of 1.48 per cent over three years, and 2.58 per cent over the bonds' full 10 year tenor.

The Singapore Savings Bonds have the unique feature of "stepped up" coupon rate. The longer the bonds are held, the better the return.

MAS rolled out the product in September as a safe, affordable and flexible option for the public to invest. Investors can apply in multiples of S$500 up to a maximum of S$50,000 in a single issue.

The bonds' accrued returns also give investors the flexibility to redeem the bonds ahead of the full 10 year tenor without any penalty.

Despite the advantages, the Singapore Savings Bonds have received a tepid market response. For the December 2015 issue, applications only amounted to S$40.99 million worth of bonds, significantly below the S$1.2 billion maximum allotment.

MAS has previously stressed that the maximum offered amount per issue is not intended as a target.

The central bank added that it is committed to issue the bonds every month for at least the next five years.