Are you a Singaporean looking to invest in something super safe and that doesn't require much capital upfront? If so, the Singapore Savings Bonds will excite you.
The Monetary Authority of Singapore (MAS) announced in May this year that they will launch a new type of government bond which is aimed at normal Singaporeans who can invest with as little as S$500.
For the first issue, you can apply for these bonds starting September 1 till September 25. Successful applicants will get the bonds credited into their central depository (CDP) accounts on October 1.
But there's no need to rush!
The government will issue a new Savings Bond every month for at least 5 years, and they are looking to issue between $2 billion to $4 billion worth of these bonds this year.
We at GET.com will explain more to you about these Savings Bonds, so that you can GET more for your money.
So, What Are Singapore Savings Bonds?
The Savings Bonds are a new type of government bond that Singaporeans can invest their savings in, and they are meant to be a long-term form of investment with safe returns.
Their interest rates will be linked to the long-term Singapore Government Securities rates. Initially the interest rates will be lower, but they will 'step-up' or increase the longer you hold on to the bond.
Like the Singapore Government Securities, the Savings Bonds are safe, principal-guaranteed investments backed by the AAA- credit rating of the Singapore Government.
Should I Buy These Singapore Savings Bonds?
Needless to say, many Singaporeans are excited by the prospect of investing in something safe that earns a definite return.
Your principal is guaranteed and you will always get your capital back 100%.
Its low starting cost is also a great way for the young who would like to invest without putting a huge outlay - investors can start with a small amount as little as $500, up to a maximum of $50,000 per application.
You can only hold $100,000 of the bonds, which have a 10-year term, at any one time.
Another great benefit about the Savings Bonds is that investors can get their money back at any time with no penalty, unlike a fixed deposit account offered by banks.
With interest rates set to rise in the US (closely related to Singapore interest rates), many people also see the issuance as a timely investment as they can earn interest linked to long-term SGS rates.
These features give investors exposure to long-term interest rate returns with maximum flexibility.
In terms of returns in similar investments such as a fixed deposit account, it makes more sense for you to invest in the Savings Bonds instead.
Average fixed deposit rates are paying less than 1 percent per annum, requires a higher deposit (usually around $10,000) and affects your liquidity as your money will be locked up within that period or risk losing interest payments.
Good Place To Park Your Savings
Bonds are known to be a safe investment asset, but because of that very nature, its returns are pretty conservative.
The average 10-year bond has been around 2.45%, while average inflation rate has been slightly higher in Singapore.
Thus, it may be suitable as a preservation of wealth, but not so much as an income-yielding instrument.
For both younger investors and those who are looking to save for retirement, the bonds can help in balancing out a riskier portfolio with focus on other higher-yielding asset classes such as stocks.
How To Apply
If you are interested in buying some of the Singapore Savings Bonds, you need to set up your account first.
You need a bank account with participating banks (DBS/POSB, OCBC and UOB) and an ATM card.
You also have to open an individual (not joint) Central Depository Securities (CDP) account with Direct Crediting Service (DCS) activated.
To find out how to open a CDP Securities account or activate DCS for an existing CDP Securities account, you can visit this website.
Application and redemption of bonds will be through the ATM. DBS/POSB customers have an additional way to do that, which is through internet banking.
Do note that there is a $2 transaction fee for each application and redemption request, and that is non-refundable.
Eager to know the interest rate schedule?
You'll have to wait till September 1st, after 4:30pm, to see the details on the MAS website. Newspapers will also publish the info the next day. You can also call the hotline on 6221-3682.