Singapore Savings Bonds: 8 things you should know

[Pek Kim Lui]

Govt bonds = govt borrowing money from you. [/QUOTE





ASK YOURSELF WHY GOVT NEED TO BORROW YOUR MONEY?
WHY THEY NEED MONEY WHEN THEY ARE SUPPOSED TO HAVE PLENTY IN THEIR RESERVES

 

[GG789]

i apply 5000 SSB and 25000 FCL. you say good mah?

how??????????

 

[Runifyouhaveto]

i apply 5000 SSB and 25000 FCL. you say good mah?

I can tell if it is good or bad if you can share with us the intended holding duration/maturity

Option 1: Maturity within 3 years
Option 2: Maturity in 3-6 years
Option 3: Full Maturity (based on FCL's 7 years)

NOTE
FCL 3.65% is 7 years
SSB is up to 10 years.

 

[Runifyouhaveto]

like this, is it SSB better?

SSB better than Fixed Deposits?
Assuming SSB rates are close to SGS (Singapore Govt Bond) yields AND depending on Maturity, if you are looking at less than 24 months, current fixed deposits are better because it SSB is has a step-up structure.



Is SSB better than FCT 3.65%?
Risk
FCL is definitely more risky than the proposed SSB. FCL has already issued massive amount of perpetual bonds and bonds under the new owner's leadership to embark on a buying spree in Australia

Yields - assuming you hold for 7 years
Assuming you hold the SSB for 7 years like the FCL 3.65% bonds. I can only assume and guess that the proposed SSB are priced closely with our SGS (Singapore Govt Bonds)
Current SGS 7-yr yields is about 2.4%
Current SGD 7-years Interest Rates Swaps (IRS) is about 2.5%
So even with a small premium, SSB is unlikely to match the 3.65% offered by FCL. Besides SSB is a step-up structure, it means you get lower interests in the earlier years, so even if interest rates increases on a modest pace, the total yields from the 7 years are still unlikely to surpass FCL. SSB will only out perform the FCL 3.65% if SIBOR or IRS experienced a massive surge in the next 7-years.

Yields - assuming you give up FCL before maturity
FCL risks trading below par value if interest rates experienced a massive spike and you don't hold to final maturity/redemption. In this case, you might face a small capital loss. When interest rates spikes up, you still get to surrender your SSB and get back your principle sum at par (no capital loss). If interest rates experiences a minor upside, FCL is still likely to outperform SSB.

 

[Runifyouhaveto]

According to MAS/Bank Data

The current interest rates swaps are approximately:
1 Year: 1.1%
2 Years: 1.5%
5 Years: 2.2%
10 Years: 2.70%

There are three recent trends:
- Emergence of Singapore Saving Bonds
- Higher FD rates
- Resumption of issues for retail bonds

Currently the gap between 1-Yr IRS and 10-Yr IRS is about 1.1% (2.7% minus 1.1%)
I speculate that these 3 factors will suck short-term cash in the financial system, we might see the gap between 1-Yr IRS and 10-Yr IRS to be reduced. I am quite sure about this.
Of course, this assumption is not valid if there are major macro-economic developments.


I am not trained in Economics, but economists term it "flatter yield curve" when the difference between 1-YR and 10-YR IRS is narrowed
It hints that the benefit of taking flexible-rate 3M SIBOR home loan diminishes, going forward

 

[frenchbriefs]

Whats the point of releasing these bonds?is sg trying to become like US create all kinds of us treasury bonds and have china and other idiots buy up their insolvent debt?

 

[sleaguepunter]

Govt bonds = govt borrowing money from you. [/QUOTE

ASK YOURSELF WHY GOVT NEED TO BORROW YOUR MONEY?
WHY THEY NEED MONEY WHEN THEY ARE SUPPOSED TO HAVE PLENTY IN THEIR RESERVES

once papigs collect a large enough stash, they will change rules, first those without MS in their cpf will have their sg bond transfer into their cpf RA upon maturity. then will find all sort of reasons not to redeem the bonds or the bond can only redeem after certain conditions are met. Cannot trust this type of arseholes who are infamous of changing the goalposts since 1985.

 

[Runifyouhaveto]

Whats the point of releasing these bonds?is sg trying to become like US create all kinds of us treasury bonds and have china and other idiots buy up their insolvent debt?

On a positive note, it recycles the money in the financial system because it is better than hiding the money under your pillow.

 

[Runifyouhaveto]

changing the goalposts since 1985.

This is why some says the most easily-understood n suitable retirement bonds are inflation-bonds which are more helpful to the man on the street.
It is simple and not likely to change terms n conditions( technical default).
http://en.wikipedia.org/wiki/IBond

 

[frenchbriefs]

On a positive note, it recycles the money in the financial system because it is better than hiding the money under your pillow.

Because the people who have their money inside their khong guan biskut tin or plastic bags for the last 20 years are going to take the money out to buy them garmen bonds?its there for a reason.

 

[Runifyouhaveto]

Because the people who have their money inside their khong guan biskut tin or plastic bags for the last 20 years are going to take the money out to buy them garmen bonds?its there for a reason.

we are just looking at it being a super low-risk (low-return) saving option.
I am not sure if physical gold is a better option for retirement because precious metal prices have been on a roller-coaster journey in the past decade.

 

[Runifyouhaveto]

A closer look at the new govt bond
The Straits Times, May 17, 2015

How long can I invest for?
How much returns will I get?
Will I make or lose money if interest rates change?
When can I start buying Savings Bonds?
When is interest paid?
What are the pros and cons of Savings Bonds?
How do the Savings Bonds compare with other investments such as corporate bonds?

http://business.asiaone.com/news/closer-look-the-new-govt-bond

 

[GG789]

I can tell if it is good or bad if you can share with us the intended holding duration/maturity

Option 1: Maturity within 3 years
Option 2: Maturity in 3-6 years
Option 3: Full Maturity (based on FCL's 7 years)

NOTE
FCL 3.65% is 7 years
SSB is up to 10 years.

intend to hold 3 yrs.

any good advice?

 

[Emery]

My favorites are now threads on Investments. Already bookmarked all of them

Ho Jinx leads by example - buy high sell low.

 

[da dick]

i might as well buy bonds from trinidad. safer right?

 

[Runifyouhaveto]

intend to hold 3 yrs.

any good advice?

If SIBOR increases within 1% in 3years,
For 3Y SSB, you get less than 7% total returns
For FCL 3.65%, you get about 10.95%

If SIBOR increases by more than 2% in 3years,
FOR 3Y SSB, you don't face capital loss
FOR FCL 3.65%, you get about 10.95% + maybe some unrealized capital loss (Interest rates spike = bond price down)

 

[Runifyouhaveto]

i might as well buy bonds from trinidad. safer right?

safer than many ASEAN countries

Recent S&P Ratings
Singapore AAA
Trindad A
Malaysia A-
Thailand BBB+
Philippines BBB
Indonesia BB+
Vietnam BB-
Papua New Guinea B+

 

[Runifyouhaveto]

Please note that for FCL 3.65%, the maturity is 7 years but the issuer have an option to slightly compensate you to redeem earlier after 48 months

Earlier redemption dates and the additional compensations
May 2019 1.825% of par value
Nov 2019 1.46% of par value
May 2020 1.095% of par value
Nov 2020 0.73% of par value
May 2021 0.365% of par value
Nov 2021 0.1825% of par value

Eg. if they early redeem in Nov 2019, for every $10000 (par value) that you hold, they reimburse give you the semi-annual interest-due + $146 (1.46% of par)

 

[GG789]

Ok. Then I apply 30k FCL.

 

[Runifyouhaveto]

Ok. Then I apply 30k FCL.

I did not recommend FCL 3.65%, lose money don't blame me.