SG50 : Singapore Savings Bonds ? (revised)

22/07/2015 by

There goes … the SSB’s have been launched. http://www.sgs.gov.sg/savingsbonds/

Ok, some minor changes. No chance of roller coaster structure for coupon payments ! https://tradehaven.net/market/more-funny-stories-on-retail-bonds-and-singapore-savings-bonds/

“Should the reference yields not allow for step-up coupons, MAS shall lower the coupon rates by the minimum amount necessary (subject to the mathematical programming function below), to maintain a weakly monotonically increasing step-up coupon schedule” http://www.sgs.gov.sg/~/media/bonds/Files/News%20and%20announcements/SSB%20Technical%20specifications.pdf

I revised some of the information on my table.

Some comments :

1. Fixed deposit rates have stealthily and steadily edged higher since the announcement even though SIBOR and SOR have come off their highs. A sign that banks acknowledge the small turf war on deposits.

Still, annual supply of SSB : $2-4 bio

Fixed Deposits of Non Bank Customers : $ 209 bio (this includes corporate deposits)

Savings Deposits of Non Bank Customers : $ 198 bio (this includes corporate deposits)

Local Banks :

UOB : Total Cust Deposits $233 BIO
DBS : Total Cust Deposits $317 BIO
OCBC : Total Cust Deposits $ 246 BIO
*includes non SGD deposits

2. I have been getting more calls, almost on a daily basis, from banks and insurance companies selling savings plans.

3. The savings bonds will be useful for the next generation of workers seeking some insurance for that rainy day savings to avoid the situation we have now.

http://www.straitstimes.com/singapore/highly-trained-middle-aged-and-out-of-work

4. And a pedantic one for those finance afficionados.

The step up coupon structure of the SSB would make them higher duration than the typical 10Y SGS given you get less coupon at the beginning and the large ones only at the end.

In that sense, the true semi annual yield would work out to be less than the 10Y bond’s yield.

Yet for argument’s sake, we should also consider the monthly put options available FOR FREE.

That makes it very important for one to check the coupon schedules when buying especially for those who do not intend to hold the bonds to maturity. This would also be advantageous in times of the inverted yield curve because MAS will “adjust” for a step up coupon.

A Final Word

Singapore Savings Bonds, Retail Bonds, ETFs ! Thank You and a happy SG50 !

Now, can we think of a way to somehow structure an unemployment insurance scheme for interested parties to purchase ? I speak from my heart, and hopefully before I hit middle age !

https://tradehaven.net/market/more-funny-stories-on-retail-bonds-and-singapore-savings-bonds/

https://tradehaven.net/market/singapore-savings-bonds-comparison-thoughts-and-implications/