How To Invest In Singapore Government Bonds – The current volatile investment climate has caused investors to adopt a “flight to safety”, reflected in a shift towards bonds and other safe options. As inflation hits record highs, more risk-averse investors are realizing they need to make their money work harder and are looking for low-risk investment vehicles to park their savings.
As such, Singapore Savings Bonds (SSB) have become increasingly popular recently, but did you know that there are other Singapore Government Securities (SGS) that you can invest in? Below are two other types of SGS that you may consider.
How To Invest In Singapore Government Bonds
SGS are essentially government bonds issued by the Monetary Authority of Singapore (MAS) and are debt instruments with AAA credit ratings. For investors, this means that securities issued by the Singapore government are among the safest investment offerings because they have a high credit rating and a very low risk of default.
Solved B) The Spot Rates For Singapore Government Treasury
When you buy a T-bill or bond, you are basically lending money to the Singapore government for a predetermined period of time. These borrowed funds can then be used for specific infrastructure projects or to develop debt markets. Since each instrument has different characteristics, the product that suits you depends largely on your investment amount, time horizon and needs.
In summary, SSBs are government bonds that offer a risk-free incremental interest rate paid semi-annually over a 10-year period. This makes SSBs popular with individuals, especially retirees who place a premium on flexibility, liquidity and a need for recurring income. With a maximum of S$200,000, SSBs can complement your other savings and investments as a safe way to save for the long term.
The average 10-year yield for SSB has been steadily rising, with the October tranche offering an average 10-year rate of 2.75% pa (p.a.) and a yield of 2.6% in Year 1 alone. The August 2022 tranche had given a higher 10-year average return of 3% per annum, but a lower coupon rate of 2% in year 1.
SGS bonds are marketable government debt securities that pay a fixed coupon every six months. They usually have longer maturities ranging from 2 to 50 years and the three categories are: SGS (Market Development), SGS (Infrastructure) and Green SGS (Infrastructure) as shown in the table below.
Singapore Savings Bonds (ssbs) Complete Guide
Like SSBs, SGS bonds pay periodic interest payments (coupons) on the amount you invest at semi-annual intervals over the life of the bond.
For example, if you bought 10,000 SGS of the SGS 50-year green bond with a coupon rate of 3% per annum, you would receive S$300 in two interest payments (US$150 each) per year. These payments are made semi-annually until the bond matures (50 years in this case – the longer you hold the bond, the more interest you get!).
If you decide to terminate the bond early, you must sell it on the secondary market. Keep in mind that the bond price can rise or fall before the maturity date.
August 2022, with cut-off yields of 2.99% and 2.98% respectively. Unlike SSB and SGS bonds, Treasury bills are zero-coupon bonds that pay no interest. Instead, they are issued at a discount.
Investment Products Backed By The Singapore Government: Ssb Vs Sgs Bond Vs Treasury Bills
For example, if you invest S$10,000 in a 1-year T-bill, you will receive the “interest” initially (S$299 discount based on 2.99% p.a.) and eventually get S$10,000 back at maturity. Simply put, you only need to pay S$9,701 upfront.
Since T-bills are the short-term government securities available, they are especially useful if you are looking for very short-term investments from 6 months to a year without having to take a lot of investment risk. They are a great way to park and increase your extra cash in the short term.
SGS are relatively safe investment instruments with decent returns in the current high interest rate environment. This allows you to put in extra money that you won’t need in the foreseeable future to earn higher interest rates.
However, keep in mind that selling your SGS bonds and bills on the secondary market can be challenging, so you should carefully evaluate and consider your liquidity concerns.
Apply For Singapore Savings Bonds
Alternatively, consider investing your CPF funds in SGS bonds and T-bills as long as the returns exceed OA’s risk-free rate of 2.5% per annum. Government securities are generally a safer option for protecting the bulk of your CPF funds. Note that SSBs cannot be funded with CPF savings.
SSBs, SGS bonds and T-bills are good options for those who want to make their idle cash work harder by taking advantage of decent returns combined with negligible risk. These government securities also act as a springboard for you to start investing in riskier investments and are a great way to diversify your portfolio.
While rising yields on Singapore government bonds and other low-risk instruments may look attractive, it’s important not to put all your eggs in one basket. Talk to a wealth planning manager to review your financial goals and build a holistic plan that includes budgeting, protecting and building a diversified portfolio with an optimal asset allocation in stocks (for growth and to beat inflation) and fixed income securities such as bonds and Treasury bills and capital plans to achieve financial well-being.
This is the fourth article in our series on fixed income investments. If you want to learn more about this asset class and how to invest in it, check out the other articles:
T Bills Vs Singapore Savings Bonds Vs Fixed Deposits Vs Endowment Plans
Do you need help choosing an investment? Try “Make Your Money Work Harder” on NAV Planner to get specific investment choices based on your goals, risk profile and preferences.
This article is for informational purposes only and should not be used as financial advice. Before making a decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser as to its suitability.
All investments involve risk and you may lose money on your investment. Only invest if you understand and can follow your investment. Diversify your investments and avoid investing a large part of your money in a single product publisher. Do you need a relatively risk-free investment vehicle to park your money? Singapore Savings Bonds (SSB) can be a safe and stable investment. Here’s everything you need to know about its returns, features and benefits. With all the talk about investing, it’s no longer enough to park your savings in a savings account when you plan to retire. Along with the rising cost of living and inflation, most people agree that you can’t afford not to invest. Are Singapore Savings Bonds the right investment vehicle for you? Not only is it virtually risk-free, it is also very flexible and requires a minimum capital to get started. With a storage period of 10 years, it can be a good addition to your overall investment portfolio. But if you compare it with other investment instruments, the returns are significantly lower. What exactly is SSB and how do they work? Table of Contents What is a Singapore Savings Bond (SSB)? How does SSB work? Monthly SSB Interest Rates Singapore Savings Bonds Expected Returns Pros and Cons of Singapore Savings Bonds Who is eligible to apply for an SSB? How do I apply for an SSB? How do I redeem my SSB? Singapore Savings Bonds vs Fixed Deposits Who Should Invest in Singapore Savings Bonds? What is a Singapore Savings Bond (SSB)? Singapore Savings Bonds (SSB) are an investment product offered to individual investors as a way to grow their money. SSBs are a type of Singapore government securities and are issued and guaranteed by the Singapore government. Since they are a type of “bond”, you are essentially lending money to the Singapore government. As an investment, SSBs have the following characteristics: Low risk (backed by the Singapore government) Low return (compared to other investments such as stocks and mutual funds) High liquidity (can withdraw investment at any time) Limited investment amount (maximum S$200,000 per person) Interest rate paid out (increases every year up to year 10) Non-transferable (cannot be traded or pledged) The minimum amount to invest is S$500, up to a maximum of S$200,000 in SSB, but keep in mind that the investment amount must be in multiples of S$500. This maximum refers to the total number of SSBs you have on hand at any given time. How does SSB work? A new Savings Coupon is issued every month with a maximum term of ten years. The longer you hold out, the more interest you earn as the interest rates “rise” every year. In question, the interest rates are fixed and fixed for the entire 10-year period. You can redeem your savings certificates any month and no penalty will be charged for ending the investment early. The interest is paid to you every six months after issue and is a bit like a dividend investment. If you have deposited cash,
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