Bond Revolution in Singapore – Lesson 1 : Back to Basics

I had always thought that if I could learn about bonds then anyone else could.

I have a strong feeling that I am right and I am about to prove it. That is because I not only learnt a little over the past years but I have, in my opinion, quite unashamedly played a part in the development of the wholesale marketplace, hopefully, to my credit (and sometimes, to my regret).

You see, we have all fallen on hard times. Because every cent we are earning is not working hard enough for us.

Hard enough for what ?

Hard enough to beat the ugly rearing head of inflation, currently running above 5% whilst interest rates are close to zero and wages are not exactly growing across the population.

Before we learn about bonds, we should really take a look at inflation in our lives.

For some of us, inflation is just the price of milk or juice or that bowl of noodles. It gets bigger. Inflation is the car we drive, the cost of air tickets, the price of your wedding dinner, the new watch you want and, the list goes on.

Inflation is essentially too much money chasing too few goods. 

And as long as the world population grows, there will always be a shortage of one good or another, be it water, land, food and other resources down to the precious rare earths that are used in manufacturing that new mobile phone for us.

This will be the start of a series of articles I will write to help an ordinary person to, first, understand the local bond market and then, potentially learn to participate in it.

Big things start from humble beginnings and this will be the foundation for a retail bond revolution to shake up our sleepy imperialistic marketplace and create a community of financially savvy and sensible folks for the future.

And yes, we will be going global next, besides throwing in all the other exciting asset classes, commodities, equities, foreign exchange and even real estate, along the way.

Last of all, do pardon me for I am writing all of this from mostly air, and the 15 odd years of mish mash data in my head which is bound to have gaps. I would appreciate feedback if the audience finds any shortcomings in the narrative and hopefully, we will manage to fix the bugs.

Why we buy bonds ?

1. to guard our savings against inflation

2. speculation on interest rates or credit worthiness of the company

The urgency has never been stronger, in times as these where interest rates are close to zero and, even, negative in certain countries, to find suitable financial asset classes to invest in.

I use the word bond to represent what, in fact, is a debt security. (Bonds have traditionally been used to refer to longer term instruments of debt.)

bond is essentially an IOU that bears returns.

The IOU could be issued by a bank, a government, a corporate, a supranational body such as the World Bank, or a quasi government body such as a statutory board, in the case of Singapore.

Characteristics of Bonds

  • maturity
  • coupon (or interest rate)
  • frequency of payment (may be zero for zero coupon bonds or bills)
  • the issuer
  • the credit rating
  • special features called covenants such as a change of control clause, a poison put, loan to valuation (LTV) ratios etc.


Types of Bonds

  • Vanilla/ Straight bonds with a fixed maturity date and fixed coupon payments
  • Floating Rate Notes with variable coupon rates that are refixed periodically
  • Callable/Puttable bonds with call/put date(s) before the final maturity date
  • Secured/Asset backed bonds that are either backed by a specific asset or a pool of assets
  • Zero coupon bonds with no coupon payments until maturity
  • Convertible bonds with an option to convert to equity
  • Seniority of bonds : senior, sub debt, perpetual/preference share – upper and lower tier for banks


Who Can Buy Bonds ?

Anybody, of sound mind, I assume.

Although in some cases, there is a need to fulfill the requirement of an accredited investor.

Sophisticated investors are defined in section 106D of the Singapore Companies Act to mean the following persons:
1. a person who acquires the shares as principal if the aggregate consideration for the acquisition is not less than S$200,000 (or its equivalent in foreign currencies);
2. an individual who acquires the shares as principal and whose total net personal assets exceed S$2m (or its equivalent in foreign currencies) or whose income in the preceding 12 months is not less than S$300,000 (or its equivalent in foreign currencies); and
3. a corporation which acquires the shares as principal and whose total net assets exceed S$10m (or its equivalent in foreign currencies) as determined by the last audited balance sheet.


Where to Buy Bonds ?

Primary Market

During launch, you can buy retail bonds through the ATM networks of the 3 local banks if you have a valid CDP account.

For wholesale bonds that have larger minimum denominations, you may approach your banker directly to buy them. These bonds are not advertised as per the Securities and Futures Act.

Secondary Market

Bonds that are already launched are openly traded in the stock exchange as well as OTC (Over The Counter) market. You can make enquiries through your banker or stock broker.

▪   Commercial banks.

▪   The Singapore Stock Exchange.

▪   Brokerage Firms.

▪   Finance companies.



Once you buy a bond, it belongs to you. You can say that you have deposited your money with the issuer of the paper.

Of course, there is no physical certificate issued. There are a handful of scripted bonds left in circulation, I suspect, but these are often not QDS (Qualifying Debt Security).

The bonds are deposited with either the CDP or a custodian agent for papers cleared through other exchanges for which you may be charged a fee by your bank.

If the bonds are deposited in your CDP account, there is no fee involved for the moment as the administrative fee of 0.08% would be waived till Apr 2013. The

Qualifying Debt Securities “QFDs”

Only applicable to non resident investors whereby withholding tax will be imposed. Note that the Budget of 2011 has extended the tax holiday to Mar 2021.

Source :

Interest Income Tax

Individual residents are exempted from most interest income taxes unless he or she is engaged in the business of trading in debt securities amongst other activities. We cannot advise any more than that.

Source :

What is the difference between buying a bank’s debt and depositing your money with some banks in Singapore ?

Singapore Deposit Insurance Scheme covers relevant deposits in SGD of an insured depositor up to a maximum of SGD50,000 for most financial institutions.

Source :


Investments Considerations

This is part of the portfolio planning process, whether it is for SGD10,000 or SGD 100,000,000.

Your options naturally increase when you have more money and yet, the funds may not necessarily be efficiently allocated. For instance, with cash of SGD 500, you may buy a rare comic and make a 50% return, but you may not be able to do the same when you have SDG 100,000 because there is only 1 comic available.

Mainstream Investments

  • Real estate
  • Equity/ETFs/ETPs/CFDs/Reits/Business Trusts – all listed on stock exchanges
  • Commodities (physical and non physical)
  • Hedge funds/Unit Trusts/Mutual Funds
  • Foreign Currencies
  • Various derivative contracts of the above
  • Venture Capital

Alternative Investments : wine, whisky, art, watches, antiques and collectibles etc.


This ends Chapter 1 of the Singapore Retail Bond Guide. No doubt in the chapters ahead, I will rattle on perhaps less boring stuff and even recount a few old stories.

If this has at least been useful to 1 person out there, then I consider it a job done.

Read on for more.