How are Singapore Government Securities (SGS) bonds different from the existing Singapore government bonds and should you invest in them?
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The Singapore Savings Bonds (SGS) may have gained a lot of traction in popularity lately due to rising interest rates, but there's also another government bond that you can buy: the Singapore Government Securities bonds, or SGS Bonds.
What lies behind the appeal of these SGS bonds? What is the coupon rate offered? And should you jump in and invest in them, too?
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What are SGS bonds?
SINGA bonds, or SGS bonds, are investment bonds issued by the Singapore government on 28 September 2021.
The purpose of launching these bonds is to raise capital to fund upcoming infrastructure improvement, green infrastructure projects, and to develop the debt market. There are three SGS bonds: SGS (Market Development), SGS (Infrastructure), and Green SGS (Infrastructure), but more on these later.
Unlike the SSB, which has a 10-year tenure, SGS bonds are more flexible: you can buy 2-year, 5-year, 10-year, 30-year, and 50-year tenure bonds.
SGS bonds also pay a fixed coupon rate, which is paid twice a year, or every six months, on 1 October and 1 April. SGS bonds are issued every month with different interest rates.
You may also refer to MAS's auction and issuance calendar 2022 here.
Below are the details of the previous SGS bond (N521100V):
|SGS type||SGS (Market Development)|
|Announcement date||22 May 2023 (the closing date is typically 1-2 days before the auction date, check with your bank for the cut-off time)|
|Total amount offered||S$2 billion|
|Total amount allotted||S$2 billion|
|Amount allotted to non-competitive applications||S$407.2 million|
|Amount allotted to MAS||S$300 million|
|Total amount applied||S$4.2 billion|
|% of Competitive Applications at Cut-off Allotted||Approximately 35%|
|% of Non-Competitive Applications Allotted||100%|
|Cut-off yield||3.19% p.a.|
|Median yield||3.1% p.a.|
|Average yield||2.89% p.a.|
|Auction date||29 May 2023|
|Issue date||1 June 2023|
|Maturity date||1 Nov 2026|
|Coupon rate||1.25% p.a.|
|Coupon payment dates||1 May and 1 Nov 2023|
|Closing yield||3.11% p.a.|
The next SGS bond (NZ13100V) will be announced on 20 June and will be available for auction on 27 June. It will be a market development bond with a 10-year tenor. You can view the issuance calendar on MAS's website here.
How do SGS bonds compare against other Singapore government bonds?
Given that SGS bonds are issued by the Singapore government bonds, you may be wondering how they compare against other government bonds including the Singapore Savings Bond (SSB) and Treasury Bill (T-bill).
The table below offers a side-by-side reading for the differences (and similarities) between them.
|Singapore Savings Bond (SSB)||T-bills||SGS (Market Development)||SGS (Infrastructure)||Green SGS (Infrastructure)|
|Purpose||To offer safe and flexible investments for retail investors.||Short-term investments to diversify your portfolio||To develop Singapore’s debt market, with funds raised remaining unavailable for spending.||To finance major, long-term infrastructure.||To finance major, long-term infrastructure with a positive environmental impact.|
|Tenor||10 years||six months or a year||2, 5, 10, 15, or 30 years||30 years||TBC|
|Minimum investment amount||S$500||S$1,000 and in multiples of S$1,000||S$1,000, and in multiples of S$1,000||S$1,000, and in multiples of S$1,000||S$1,000, and in multiples of S$1,000|
|Investment cap||S$200,000 per individual||No limit||Limit for each auction||Limit for each auction||Limit for each auction|
|Maturity and redemption||May be redeemed early||No early redemption||No early redemption||No early redemption||No early redemption|
|Indicative coupon rate (per annum)||3.07% (GX23050W; average over 10 years)||3.58% (BY23101W)||2.625% (NZ19100S)||1.875% (NA21200W)||TBC|
|Source of funds||Cash or SRS||Cash, SRS, CPF||Cash, SRS or CPF||Cash, SRS or CPF||Cash, SRS or CPF|
Three SGS Bonds in total
As mentioned, there are three SGS Bonds in total: SGS (Market Development), SGS (Infrastructure), and Green SGS (Infrastructure).
The main purpose of SGS (Infrastructure) is to raise capital to fund upcoming infrastructure improvement and expansion needs.
Meanwhile, Green SGS (Infrastructure) will be used to fund major infrastructure developments that are considered to be better for the environment, such as railways. If that has got all those ESG investors excited, you’ll have to wait a little longer for the bond to be issued.
Rounding out the trio is the SGS (Market Development) bond, which was the OG SGS Bond, now renamed to make room for its two new siblings. This bond continues in its original mission, which is to foster the development of Singapore’s debt market.
In a nutshell, the SSB offers more flexibility, as you can redeem your bonds early. However, do note that the coupon rate increases yearly, with the last two or three years enjoying the highest coupon rate.
This also means that early redemption will cause you not to achieve the advertised average coupon rate. However, SSBs require only S$500 to start investing, and you can freely increase your investment in any amount you wish.
Last but not least, T-bills are short-term bonds that last for either six months or a year and are issued at a discount to their face value, and investors will receive the full face value at maturity.
Also read: The SSB vs CPF: Which One Has Better Returns?
On the other hand, SGS bonds don't offer early redemption, which could be an issue for investors sensitive towards the long tenor of 30 years. However, you are free to trade your holdings on the secondary market - if you’re willing to accept not receiving the face value of your bonds in return.
You’ll need a higher capital to start investing - S$1,000 at least, with increments in multiples of S$1,000. To fund your SGS (Infrastructure) investment, you can use cash, the monies in your Supplementary Retirement Scheme account, or the balances in CPF.
Should you invest in SGS Bonds?
Generally speaking, government bonds are considered one of the best ways to balance your portfolio, given their low volatility and tendency to be negatively-related to the equities market. As such, holding some government bonds will offer some needed stability when the markets are roiling.
Of course, not all government bonds are created equal, and at the risk of sounding hyperbolic, SGS bonds are one of the safest bonds you can invest in. It has a rating of AAA, which probably has something to do with the fact that it is backed by the Singapore government itself.
On the flipside, if you buy bonds expecting excitement, prepare to be disappointed. However, if you look upon SGS bonds, especially SGS (Infrastructure) as a twice-yearly money drip for the next 30 years, you may come away more than satisfied.
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Sounds good, how can I start investing in SGS bonds?
Here's what you need to apply for the SGS Bond.
- A bank account with a local bank (DBS/POSB, UOB, OCBC)
- A Central Depository (CDP) account that's linked to your bank account so that the coupon and payments can be credited into your bank account
- For CPFIS application: a CPF investment account with one of the three CPFIS agent banks (DBS/POSB, OCBC, and UOB). You don't need to open and CPF investment account if you intend to invest with CPFIS-SA funds
- For SRS application: An SRS account with one of the three SRS operators (DBS/POSB, UOB, OCBC)
How to buy SGS bonds:
- For cash application: via DBS/POSB, UOB, OCBC ATMs, or through internet banking
- For SRS application: internet banking or your SRS operator (DBS/POSB, UOB, OCBC)
- For CPRIS application: submit the application in person at any CPFIS or bank branches (DBS/POSB, UOB, OCBC)