Monday, September 21, 2015

Apply For This Month's SSB?

Chin Wai wrote a very good post about the SSB and how it is structured quite differently from normal bonds. In his post, he also posting his findings that the simple average August yields were very close to the posted SSB yield to be applied in September and issued in October.

I've also gone to the MAS website to download the yields and calculated the simple average and compared it to the listed SSB simple yields.

Now, this is pretty interesting if you can predict with some degree of accuracy what the next month's yield would be!

Similarly, doing the same calculation so far for this month, you would see that the yields across the entire curve have shifted upwards. However, I think it is still too soon too say yet because we don't need to make the decision so quick.

Based on the calendar for the SSB, the last date for application is on the 25th of September. Since the 24th is a public holiday, there will be no data for the 24th. However, extracting the yields and calculating the average should give a pretty good guess of the following month's yield if this suspected relationship holds true.

Currently, we only have 14 days of data out of a month of 22 days. This is only 63% of the data points. If we wait until the 25th to decide to apply, we would have 17 days instead, which is 77% of the data points.

I had actually drafted out 2 posts about the SSB - one to post if I apply for it, and another to post if I was going to wait and apply for the issue. For some reason, I didn't think to use the entire month's data and I was only looking at the last week's data. Using the whole month does seem a lot more accurate. I am sure that with the data available and trial and error of a few months, we will have a better understanding of the SSB and how it sets its yield.

I will monitor the yields and on the 25th I will decided if I will apply for the SSB or not. However, looking how things are going, I think I would not be applying this month!

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