Singapore Savings Bonds: Everything You Must to Know

Singapore Savings Bonds SSBs were introduced by MAS in Sep 2015 as an alternative bond investment product to Singapore Government Securities SGS bonds. Retail investors will find Singapore Savings Bonds extremely because it is low risk, highly liquid, low cost – no commission charge to buy and redeem.

As of Mar 2018, 57,000 investors have invested in more than S$1.9 billion worth of SSBs so far as noted by MAS in their Media Release on 1 Mar 2018. Demand for Singapore Savings Bonds has recently spiked and MAS has made 2 changes to the investment policy.

  1. $50,000 issue limit for each issue of Singapore Savings Bonds but retained $100,000 individual limit – Announcement by MAS
  2. Increased issuance size from S$150 million to S$200 million – Media Release by MAS

If you are thinking of investing in them, this is the time to learn more about Singapore Savings Bonds SSBs. This page will show you

  1. Characteristics of Singapore Savings Bonds
  2. Key benefits of Singapore Savings Bonds
  3. Investment Strategies for Singapore Savings Bonds
  4. How to Apply for Singapore Savings Bonds?
  5. How to Redeem My Singapore Savings Bonds?

Characteristics of Singapore Savings Bonds

Let’s get started. Here’s a simple summary of SSBs that you must know. To read more about these bonds, do head to the official MAS Singapore Savings Bonds website.

  • 10-year maturity but redeemable in any month
  • Interest coupons increase with holding period
  • Interest is paid semi-annually
  • Not traded on any exchange
  • Fully backed by the Government of Singapore
  • Denominated in units of S$500
  • Maximum investment across all SSBs is S$100,000

Difference between SSBs and SGS Bonds

Now that you know something about SSBs, you should also know the difference between SSBs and Singapore Government Securities SGS bonds. SGS bonds have been issued by MAS for a very long time and they are considered vanilla bonds. SSB and SGS bonds serve different purposes in one’s portfolio.

Singapore Savings BondsSGS Bonds
Maturity10 years2, 5, 10, 15, 20, 30 years
CouponIncreasing yieldConstant yield
Coupon paymentSemi-annual
Selling/RedeemingBonds can only be sold back to MAS ($2 transaction fee to redeem/partially redeem bonds)Bonds can only be sold on secondary market SGX (standard brokerage transaction costs)
Custodian of Invested BondsCentral Depository (CDP)
IssuerGovernment of Singapore
Investment amountIn multiples of S$500
Max S$50,000 per issue
Max $100,000 across all issues
In multiples of S$1,000

Key Benefits of Singapore Savings Bonds

Safe and Low Risk Bond

Singapore Savings Bonds are fully backed by the Government of Singapore which holds the highest credit rating from major credit rating agencies (eg. S&P’s AAA rating). Economically, since the Government of Singapore also influences monetary policy (money printing), there is no basically reason they cannot return the invested funds.

SSBs are very safe because they are also insulated from the volatility of interest rates as they are not traded, unlike SGS bonds and Corporate bonds. You can redeem invested SSBs directly with MAS, so there is no capital loss in the event interest rates rise.

Good liquidity with No Redemption Cost

Singapore Savings Bonds can be sold back to MAS in any month with no penalty or transaction cost. This is excellent liquidity and extremely low investment expense. Again, selling SGS bonds and Corporate bonds are subject to market liquidity and exchange commission charges. On the other hand, fixed deposits penalise early withdrawals. Overall, SSBs are wonderful for passive investors who wish to park money in a safe and liquid environment.

Low Barriers of Entry

There is no commission charge to apply for Singapore Savings Bonds apart from a nominal bank fee of S$2 for each application. SSBs can be bought in denominations of S$500 starting from S$500. These are good enough reasons for an individual to start saving with SSBs.

Investment Strategies for Singapore Savings Bonds

Statistics published by MAS in Feb 2017 agree that Singapore Savings Bonds are popular with all ages. 44% of bondholders are aged 48 and above while 40% are between 31 and 47 years old. Most notably, reference portfolios featured in Save & Invest Portfolio Series on Straits Times all feature SSB. They were chosen by a 26-year old working adult, a 39-year old family man and a 63-year old retiree.

SSBs are for all ages so you should read on below to see how you can include SSBs in your investment portfolio.

Investment Portfolios with Singapore Savings Bonds

Start Savings Programme

Tip: Ideal for young adults

Singapore Savings Bonds were introduced by MAS to encourage Singaporeans to save for the long term. By having a minimum investment amount of S$500 and issuing bonds monthly, MAS clearly wants investors to treat SSBs as a savings programme. Investors can start small and consistently put money on a monthly, bi-monthly or even a semi-annual basis. To reap the full benefit of the step-up coupons, investors should refrain from redeeming the bonds early but hold them until maturity.


Diversify Portfolio

Tip: Ideal for working adults

Investors should not possess only equities and real estate in their portfolio. Bonds can help to reduce portfolio volatility to achieve an optimal risk-reward ratio. Singapore Savings Bond is an excellent tool for this purpose. SSBs provide a steady predetermined income stream over 10 years. Since they are not traded, they provide stability in the portfolio. Investors do not have to worry about daily fluctuations in bond price.

Park Cash

Tip: Ideal for older investors with accumulated wealth

SSBs are liquid and can be redeemed in any month. If rates rise, you can simply sell the bonds back to MAS, redeem your funds and invest them in a newer SSB or higher interest rate product.
SGS bonds and Corporate bonds can appreciate in value if you get the market timing correct but they can also cause investment losses. They are also affected by market liquidity and exchange commission charges. Fixed deposits have a fixed tenure that you must fulfill otherwise there will be interest penalty for early withdrawals. Do learn the characteristics of these investment products before deciding what is right for you. Business Times Singapore has a great infographic explaining the differences between SSBs, SGS bonds and fixed deposits.

How to Apply for Singapore Savings Bonds?

Interested investors can apply for SSBs during the application period in the month. Singaporeans, PRs and foreigners can apply.

The mode of application is cash only. As of Mar 2017, MAS is studying the possibility of allowing investors buy SSBs using their Supplementary Retirement Scheme funds.

Interested investors have to possess a Central Depository (CDP) account to store bond scripts electronically. This is the same depository that stores your equity scripts bought on SGX. If you have not opened one, you must apply for one via securities trading platforms or directly with CDP.

Head here to learn more about the latest issue of Singapore Savings Bonds in our MUST-READ Investment Guide to SSBs.

 

Timeline to Note

Here’s a quick infographic regarding the process of application. You can get more information on the application process on the Singapore Savings Bonds website too. Do not miss out on the application deadline – 4th last business day of the month!

How do I Receive my Coupon Interest Payments?

Bondholders will receive coupon payments every 6 months. It is paid on the 1st business day of the month when due. This interest will be automatically credited to the bank account linked to your CDP account.

How to Redeem My Singapore Savings Bonds?

SSBs can be redeemed in any month before maturity. Although strongly discouraged, investors can do so with almost zero commission. The bonds can also be redeemed partially in denominations of S$500. You will receive the redeemed amount together with the proportionate accrued interest (in the case of partial redemption for that half year).

Bondholders should submit bond redemption through the same application channels: ATM and internet banking. Banks charge a $2 processing fee, similar to the fee for bond application. Below is an illustration of the redemption timeline. If you require more information, head here for a detailed redemption FAQ provided by MAS.


Last updated: 12 Apr 2018