Source: http://www.channelnewsasia.com/news/business/singapore/new-savings-bonds-for/1742898.html
Looks like a possible place to park cash reserves for better returns while maintaining liquidity. Might be better than a bond ladder and a Time/Fixed Deposit.
This is purely an opinion, but I thought I'll guess the interest rates just for fun. :p
They called it a "Term Premium".
What is a "Term Premium"?
It is in layman, the difference between the the yield of a long-term bond and a short-term bond (both assuming you hold it to maturity). The term premium depends on the interest rates of the bonds individually.
The bond principal is guaranteed by the Government, with two extra features:
- Ability to get his or her money back in any given month with no penalty
- Interest rates that are linked to long-term Singapore Government Securities rates.
Yet, the bonds offer an increased interest for a longer holding period.
I doubt the government will give the same yield as the CPF OA nor SA, it will deter people away from putting money in for retirement.
It should not be expected to replace nor compete with T-Bills nor SGS bonds I guess.
Neither will I expect them to compete with endowment plans or in any sense to kill off the businesses here.
So looking at the MAS website,
Treasury bills yield slightly below 1% p.a.
Difference between the coupon rate of 30 year bond and 2 year bond currently is 0.375% p.a.
Difference between the currently highest coupon rate bond and lowest coupon rate bond (20 year and 5 year respectively) is 1.75%
So I'm guessing the range would be 0.375% and 1.75% p.a. (increasing for the duration held) which may compete with Time Deposits, but does not beat CPF, endowment plans, T-bills and Bonds. It may be slightly lower to compensate for daily fluctuations in bond prices as well.
What do you guys think?
Azraeel
ReplyDeleteJust wanted to let you know that I have included your article in my Singapore Savings Bonds roundup(it’s a broad list of 71).
Check it out!
http://www.giraffevalue.com/sg-personal-finance/71-resources-on-singapore-savings-bonds/
Thanks for writing such a valuable content, and it will be great if you feel inclined to share the post with your audience, I would appreciate the exposure.
Cheers!
GiraffeValue
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Please Del this comment after you read it. Thanks!