Latest Singapore Government Securities (SGS) Bonds Sep 2022 Guide: Interest Rates & How To Buy/Sell SGS Bonds in Singapore
Justin Ohā
Aside from the more popular and oversubscribed Singapore Savings Bond (SSB), Singaporeans have another option to invest in: the Singapore Government Securities (SGS) bonds.
SGS Bonds pay you a fixed rate of interest, along with more flexibility in maturities that range from 2 to 50 years.
You can buy SGS bonds using cash, SRS or CPF fundsĀ with no overall limit!
Curious to find out more? Click to jump to the relevant sections:
- This Month’s SGS Bond Auction Updates
- How Do SGS Bonds Work?
- SSB vs SGS bonds
- How Do I Buy SGS Bonds?
- How Do I Sell SGS Bonds?
- How Do I Check My SGS Bonds?
- Are SGS Bonds Right For Me?
TL;DR: Singapore Government Securities (SGS) Bonds ā SGS Bonds Interest and More
The interest rate for SGS bonds changes every month and is only determined at the auction. So here’s a look at the past coupon rates in 2022:
| Details Of This Month's Bond | |
|---|---|
| Issue Code | NA21200W |
| ISIN Code | SGXF89085702 |
| SGS Type | SGS (Infra) |
| Tenor | 30 years |
| Amount Offered | S$1.9 billion |
| Issue Date | 3 Oct 2022 |
| Maturity Date | 1 Oct 2051 |
| New/Reopen | Reopen |
| Coupon Rate | 1.875% p.a. |
| Coupon Payment Dates | 01 Oct and 01 Apr |
| Application Period | Opens: 21 Sep 2022 Closing date: Typically 1 - 2 business days before auction date (Check with your bank for the exact closing date) Auction Date: 28 Sep 2022 |
| Investment Amounts | Minimum of $1,000 (in multiples of $1,000) |
Individual investors can submit bids for SGS through selected banks’ ATMs and internet banking portals. Applications through these channels may close 1 to 2 business days before the auction. Individual investors should check with their banks on the exact cut-off time.
Dates: Where the issue/settlement date, coupon payment or redemption date or closing date of application specified above falls on a day that the electronic payment system, established by the Monetary Authority of Singapore, is not in operation, issuance/settlement, coupon payment, redemption, or the close of application, as the case may be, will be effected on the next business day when the electronic payment system is in operation.
How Do SGS Bonds Work?
Singapore Government Securities (SGS) bonds pay a fixed rate of interest and have maturities ranging from 2 to 50 years. There are three categories of SGS bonds ā SGS (Market Development), SGS (Infrastructure) and Green SGS (Infrastructure).
The most common category that you will encounter is the SGS (Market Development) bond with the objective to develop the domestic debt market. The two other types of SGS (Infrastructure) Bonds serve to finance major, long-term infrastructure, with the Green SGS (Infrastructure) focusing on environmentally sustainable projects.
Investors are paid a fixed coupon rate (interest) over the length of the specified tenor.
For example, if you were to buy S$1,000 worth of SGS bonds with a coupon rate of 2% p.a., you will be getting $20 in the form of two coupon payments ($10 each) every year. These payments will be made every six months until the bond matures.
This means that for SGS bonds with a longer tenor you will be getting more interest (assuming the coupon rate is the same)!
Are SGS Bonds a Good Investment?
Before we dive into how to buy SGS bonds, let’s take a closer look at what investing in SGS bonds means for us and how it differs from the more popular SSB.
How Do I Withdraw Money From SGS Bond?
Investors are not able to redeem SGS bonds early. However, you may choose to sell your SGS bond on the secondary market at DBS, OCBC, or UOB branches; or on SGX through securities brokers.
That said, the price of the bond may rise or fall before maturity and the trading volume for SGS bonds is low, making them rather illiquid. So be sure that you are okay with locking up your money for the duration of the tenor!
At maturity, you will get the par (or face) value of the bond. In other words, if you bought S$1,000 worth of SGS bonds, you will get S$1,000 back at maturity. The interest will already be paid to you at the end of the tenor.
How Will I Receive Interest Accrued From My SGS Bond?
Interest from your SGS Bond will be paid in the form of coupon payments on the first day of the month, every 6 months from the bond’s issuance date. Should the payment date fall on a public holiday, you will receive your payment on the next business day.
SGS bonds trade ex-couponĀ 3 working daysĀ before the coupon date.
If you’ve bought your SGS bond with cash, you will receive your interest in the bank account linked to your Central Depository (CDP) account.
If you’ve bought SGS bonds using Supplementary Retirement Scheme (SRS) or CPF Investment Scheme (CPFIS) funds, you will receive the payments in your SRS or CPFIS account instead.
Are Singapore Government Securities Bonds Risk-Free?
SGS bonds are completely backed by the Singapore Government, which has a “AAA” credit rating.
This reduces the risks of investing in SGS bonds to the bare minimum (read: thereāre still risks tho).
The only other countries that enjoy the same āAAAā credit rating are countries such as Switzerland.
Having such a strong rating arguably makes the SGS bonds one of the safestĀ products in the market.
SGS Bonds vs SSB vs T-bills – What Are The Differences?
| Singapore Savings Bonds (SSB) | Singapore Government Securities (SGS) Bonds | Treasury Bills (T-Bills) | |
|---|---|---|---|
| What is it? | Safe and flexible bond option for investors | Tradable government debt securities | Short-term tradable government debt securities |
| How does it work? | Pays interest every 6 months | Pays a fixed couple every 6 months | Investors buy it at a discount. Upon maturity, investors will then receive the full face value of the bill |
| Investment duration | 10 years | 2, 5, 10, 15, 20, 30, 50 years | 6 months or 1 year |
| Minimum investment | $500, and in multiples of $500 | $1,000, and in multiples of $1,000 | $1,000, and in multiples of $1,000 |
| Maximum limit per investor | $200,000 | Auction: up to allotment limit for auctions Syndication: None | No Limit; up to the allotment limit for auctions |
| Fees | Cash: $2 | Cash: $2 (Waived if you apply through DBS internet banking) | Cash: $2 (Waived if you apply through DBS internet banking) CPFIS: $2.50 transaction fee, $2 quarterly service fee per counter |
| Type of Interest Payment | Fixed coupon, steps up each year | Fixed coupon | No coupon; issued and traded at a discount to the face (par) value |
| Payment of interest | Every 6 months, starting from the month of issue | Every 6 months, starting from the month of issue | At maturity |
| How is the price and rate determined? | The interest rate is fixed and published by Monetary Authority of Singapore (MAS) every month The interest rate is announced before the application | Determined by auction | Determined by auction |
| How to apply? | Apply through DBS/POSB, OCBC and UOB ATMs or internet banking | Apply through DBS/POSB, OCBC and UOB ATMs or internet banking | Apply through DBS/POSB, OCBC and UOB ATMs or internet banking |
| How to redeem? | Redeem the full principal with accrued interest through Online Bank or ATM There will be no penalty for early withdrawal | No early redemption | No early redemption |
| Can we buy/sell on secondary markets? | No | At DBS, OCBC or UOB main branches; on SGX through brokers | At DBS, OCBC or UOB main branches |
| Transferable? | No | Yes | Yes |
| Can we invest using our SRS account? | Investors can invest through their respective SRS Operator's internet banking portal | Investors can invest through their respective SRS Operator's internet banking portal | Investors can invest through their respective SRS Operator's internet banking portal |
| Can we invest using our CPF/SRS? | CPF: No SRS: Yes | Auction: Yes Syndication: No | Yes |
| Tax | There is no capital gains tax in Singapore | ||
How to Buy Singapore Government Securities Bonds
Hereās how you go about applying for the SGS Bond.
What Do You Need?
Before applying, make sure you have the following:
- A bank account with any local banks in Singapore (DBS/POSB, OCBC or UOB)
- Central Depository (CDP) accountĀ that is linked to theĀ bank accountĀ you intend to invest with
- A CPF Investment Account with one of the three CPFIS agent banks (DBS/POSB, OCBC, and UOB) for CPFIS-OA investments (no account needed for CPFIS-SA investments).
- An SRS account if you are using funds from your SRS
How to Buy (New) SGS Bonds at Auction?
Cash
You can apply for an SGS bond through two methods:
- Apply at an ATMĀ (only DBS/POSB, OCBC, or UOB) near you, OR
- Apply through Internet BankingĀ under Singapore Government Securities
SRS
Apply through the internet banking portal of your SRS Operator (DBS/POSB, OCBC, or UOB)
CPFIS
Submit an application in person at the main branch of your respective CPF Investment Scheme (CPFIS) agent bank (DBS/POSB, OCBC, or UOB).
What are “Competitive” and “Non-competitive” bidding?
As you apply for new SGS bonds, you will come across the option of a “competitive” and “non-competitive” bid.
A non-competitive bid does not specify the yield. Instead, you only specify the amount you want to invest and those funds will be invested regardless of the yield. This is the option that the average Singaporean should go for.
On the other hand, a competitive bid is usually for institutional investors or the more investment-savvy. Opting for a competitive bid means that your funds will only be invested should the cut-off yield go above your specified yield.
Do note that you may not get the full amount that you applied for, depending on how your bid compares to the cut-off yield (i.e. If your bid is lower than the cut-off yield, you will get the full amount. If your bid is equal to the cut-off yield, your return amount might be lower as the allocation is pro-rata.)
Non-competitive bids will be allotted first, up to 40% of the total issuance amount. If the amount of non-competitive bids exceeds 40%, the bond will be allocated to you on a pro-rated basis. The balance of the issue amount will then be awarded to competitive bids from the lowest to highest yields.
SGS Bonds – Syndication
On top of the regular schedule of SGS Bond auctions, MAS may use an additional method of issuing bonds called syndication. This provides MAS with the flexibility to determine the timing and size of issuance based on market conditions. In 2022, the only syndicated issuance is that of the Green SGS (Infra), 50-year bond.
SGS Bonds – Mini-auctions
Mini-auctions are reopenings of SGS bonds with a maximum size of S$1.5 billion. They provide MAS with the flexibility to issue more bonds if there are unexpected instances of strong demand for a certain SGS bond.
Unlike normal auctions, MAS will announce its decision on whether there will be a mini-auction 1 month before the scheduled issuance date. If the decision is to have a mini-auction, MAS will also announce the bond to be re-opened. The process is exactly the same as regular SGS bond auctions and the issuance size will be announced 5 business days before the auction date.
How to Buy (Old) SGS Bonds
Reopened Auctions
If you’re lucky, there are opportunities to buy older SGS bonds from previous auctions.
You can check the status of bond issuance on the MAS website.
ForĀ reopened bonds, since the price of the bond is only known after the auction,Ā 115% of the bid amount will be debited as a safeguard. Any difference in the price will be refunded or debited from your bank account after the auction.
SGX and Dealer Banks (Secondary Market)
Aside from bidding at an SGS bond auction, you can also buy SGS bonds just like stocks on the Singapore Stock Exchange (SGX) or dealer banks (DBS/POSB, OCBC, or UOB). However, you will have to deal with brokerage fees and transaction costs just like when trading stocks.
On the bright side, you may buy older SGS bonds at a discount!
If a bond is trading below par value, for example, at $80 instead of $100 (the usual price shown on SGX for an SGS bond), you would have saved $20 and be entitled to the remaining coupon payments until maturity.
Source: SGX
Note: SGS bond prices quoted on SGX are market prices and include accrued interest (known as the ādirty priceā). The daily closing prices shown on MAS are bid rates quoted by primary dealers and exclude any accrued interest (known as the “clean price”).
How to Sell Singapore Government Securities Bonds
Since you cannot redeem SGS bonds early, you may consider selling your SGS bonds on SGX through your broker or dealer banks (DBS/POSB, OCBC, or UOB).
They trade just like stocks:
But remember, the price of the bond may rise or fall before maturity, so youĀ could lose some capital if you were to sell at a value below par value.
How Do I Check My SGS Bonds?
Once you’ve successfully applied for an SGS bond, you can view your purchases or sales here:
- Cash applications: CDP statement.
- SRS application: Statements from your SRS Operator (DBS/POSB, OCBC and UOB are SRS operators).
- CPF-OA application: CPFIS statement sent by your agent bank (DBS/POSB, OCBC and UOB are CPFIS agent banks).
- CPF-SA application: CPF statement.
Are SGS Bonds Right For Me?
If you are a new investor who might want to redeem your bond early, consider investing in SSBs instead as you don’t have to go through the tedious process of selling your bonds on the exchange.
If you have a large sum of money and have excess cash to invest due to the limits of SSB, you may consider parking your funds in SGS bonds and lock in the (current) high interest if you have a long investment horizon (5 to 10 years typically, depending on the tenor of the particular SGS bond).
That said, SGS bonds offer a low return on investment and with the headline inflation rate currently at 7% year on year, you’re still facing a tough battle.
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