Singapore Savings Bond

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#1
http://www.businesstimes.com.sg/companie...aven-asset

S'pore bonds finding new love as safe-haven asset
Fixed income index outperforms STI for a second time since July, gaining 0.22% last week against a 1.18% decline in equity market

By
Siow Li Senlisen@sph.com.sg@SiowLiSenBT
straitsisgindexw0910.jpg While the Singapore currency fell 0.71 per cent against the US dollar last week, the Singapore Fixed Income (SFI) Index gained 0.22 per cent over the same period. - PHOTO: BLOOMBERG
9 Oct5:50 AM
Singapore

INVESTORS are flocking to take cover under Singapore bonds umbrella amid gathering clouds over the global economy.

Even the weakening Singapore dollar has failed to dent their enthusiasm for the fixed income securities, in particular government bonds.

While the Singapore currency fell 0.71 per cent against the US dollar last week, the Singapore Fixed Income (SFI) Index gained 0.22 per cent over the same period. The equity market, as measured by the Straits Times Index (STI), declined 1.18 per cent.

Year-to-date, the SFI has outperformed the STI by 0.42 per cent (+3.13 per cent versus +2.71 per cent). The SFI last outperformed the STI in July 2014.

Gains in the SFI were largely driven by government bonds; the SFI Government Bond Index advanced 0.34 per cent. Corporate bonds remained relatively flat.

The Markit iBoxx SGD corporate total return index touched a new high of 110.2736 on Tuesday as investors looked for safety amid geopolitical concerns.

Jason Khoo, HSBC Bank head of debt equity markets, SEA, said the gains from Singapore's fixed income indices this week have largely been driven by government bonds and, to some extent, it can be attributed to a flight to quality given the geopolitical backdrop and concerns in Europe and the United States over slowing global growth.

"The SGD bond market and, by extension, the Singapore dollar, continues to be attractive to investors given its relative stability, and on a year-on-year basis, the SFI, SFI Corporate and SFI Government Bond Indices have all moved upwards, driven by strong liquidity that has been channelled towards the SGD bond market."

The strength of SGD government bonds is also mirroring that of US Treasuries which have also been moving ahead.

"The correlation of SGD Government bonds to the US Treasuries has been high, with both the current 10-year SGD Govvies and US Treasury seeing a total return of over one per cent in the past two weeks," said Elaine Ngim, Coutts Asia head of fixed income.

Still corporate-bond demand remains strong with local investors confident in domestic issuers who are taking advantage of current low interest rates to tap the market before next year's anticipated rate hikes.

Tan Kee Phong, OCBC Bank head of capital markets, said: "There is a robust pipeline built up for SGD bonds and there are a number of demand and supply factors contributing to this."

"For investors, sentiment is supportive of issuances by acceptable credits, against a backdrop of generally positive economic outlook and low inflationary environment.

"For issuers, there remains ample local currency liquidity that can be tapped," said Mr Tan.

"Coupled with increased expectations of interest rate rises - borne out by the strengthening of the USD vs SGD - this incentivises issuers to borrow now, rather than later, when reference rates rise further eventually," he said.

Year-to-date, SGD corporate bond volume has reached S$20 billion from 120 deals compared with S$14.8 billion from 111 issuances same time last year.

The continued strength of the USD is unlikely to draw away local bond investors as they have SGD funds to deploy, said Clifford Lee, DBS Bank head of fixed income.

"As mentioned a while back, most investors in the SGD bonds are not investing on the back of a foreign currency play i.e. they are not investing in SGD bonds in a short-term anticipation of an appreciation of the SGD. Most of these SGD investors have natural SGD to deploy, so as such they are less sensitive to the recent USD/SGD movements," said Mr Lee.

In fact, Mr Lee believes that when the current weakness in SGD reverses, local debt will be even more attractive as it will draw in offshore investors who see it as a way to profit from both the local currency as well as yield.

"I've in fact said that I'd expect the SGD bond market to get a further boost once the SGD currency play comes into consideration particularly for the offshore investors not based in SGD. But that situation hasn't come about as yet," he said.
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#2
SINGAPORE: The Government and Monetary Authority of Singapore (MAS) are planning to introduce a new type of bonds to help individual investors get a better return on their savings, Senior Minister of State for Finance Josephine Teo said on Thursday (Mar 26).

New savings bonds for individual investors to be introduced
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#3
Yes. Govt should do a zero coupon for CDA for education planning.
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
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#4
MAS announced today that Singapore savings bonds to be launched second half of 2015: http://btd.sg/1CoDRyf
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#5
At $500 denomination, monthly payment, capital guaranteed, I thought this is a direct competition to bank deposits.
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#6
(30-03-2015, 09:27 PM)egghead Wrote: At $500 denomination, monthly payment, capital guaranteed, I thought this is a direct competition to bank deposits.

This sounds like an interesting product, if only to diversify an investor's portfolio away from equities.

Some questions I would like to ask:-
1) What is the coupon rate to start off with? The news only mentions that this will be tagged to the SGS.
2) What will be the step-up rate, and how often will this be applied? (e.g. once a year)?
3) How frequently will coupons be paid? Annually or semi-annually?
4) Does interest on the SSB accrue the moment you buy it, or is it just payable on a specific date? E.g. $1,000 principal at 2% with coupons paid semi-annually means $10 paid every 6 months (e.g. June 30). But if I buy it say May 31, does this mean I only get 1 month worth of interest (i.e. $1.67)?
5) What is the maximum cap which one can buy these SSB? I am hoping it will be at least $10,000. Over 10 years, at least this means one can place a total of $100,000.

Regards.
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#7
It's fascinating. Real innovation by the government - kudos. Limiting it to individual investors up to a ceiling, and making it non-tradeable would be a necessity given it is better than market.

The investible ceiling hasn't been announced yet, so a lot would hinge on it.
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#8
I think the product will disappoint most vb forumers. If it start with 0.9% interest for the first years, rising to 2-3% for 10 years. If I need short term liquidity I would have place it in a 3 months fd. BOC sg now offerin 1.64% for 3 month, Y would I go for 0.9% p.a? Anything below 50K with a bank is consider risk free since the deposit insurance covers up to that amount.
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#9
some details from MAS here, more will probably only come closer to launch: http://www.mas.gov.sg/News-and-Publicati...stors.aspx

interest to be paid every 6 mths: http://www.mas.gov.sg/~/media/resource/n...0Bonds.pdf

(30-03-2015, 09:38 PM)Musicwhiz Wrote:
(30-03-2015, 09:27 PM)egghead Wrote: At $500 denomination, monthly payment, capital guaranteed, I thought this is a direct competition to bank deposits.

This sounds like an interesting product, if only to diversify an investor's portfolio away from equities.

Some questions I would like to ask:-
1) What is the coupon rate to start off with? The news only mentions that this will be tagged to the SGS.
2) What will be the step-up rate, and how often will this be applied? (e.g. once a year)?
3) How frequently will coupons be paid? Annually or semi-annually?
4) Does interest on the SSB accrue the moment you buy it, or is it just payable on a specific date? E.g. $1,000 principal at 2% with coupons paid semi-annually means $10 paid every 6 months (e.g. June 30). But if I buy it say May 31, does this mean I only get 1 month worth of interest (i.e. $1.67)?
5) What is the maximum cap which one can buy these SSB? I am hoping it will be at least $10,000. Over 10 years, at least this means one can place a total of $100,000.

Regards.
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#10
sounds more like copying those structured products already in existent from the banks?
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