Saturday, December 26, 2015

Singapore Savings Bond: Dec 2015 Review, Feb 2016 Preview

Hey everybody, here's my monthly post on the SSB closing and the forecast for next month. I'm trying to streamline my posts to make them more condensed and info-packed in a regular structure, so it's both easier for readers to quickly digest the article and for me to pump them out on a regular basis.

Last month I previewed my guess for the Jan 2016 SSB, and I also made commentary on the take-up rate of the previous Dec 2016 issue.

First up is the news regarding the 2016 issues. This news actually came out on 1st Dec as an MAS presser, but of course next to nobody reads this and I was away on reservist so I didn't comment on it either. Basically, an SSB will be issued every month of 2016 with $300 million for the Jan issue. While it is a HUGE drop from the $1,200 million that they were offering in 2015, the SSB take up rate has been... pathetic, and that's putting it nicely.

For the December 2015 SSB, a pathetic $40 million was taken up. That's 3% odd of the entire $1,200 million open to issue! Compared to the Oct and Nov issue, which were somewhat respectable, the demand for SSBs is seriously... pathetic. I keep using that word, but I find it hard to find other synonyms for this. So even with the reduced $300 million being offered, there is plenty of capacity for people who are interested in subscibing for the SSB. I think it will be very many years before people will need to re-educate themselves on the bidding and allotment process IF demand ever exceeds supply. That's a big if. It looks highly highly unlikely in the near future.

As expected, without any inversion presenting itself, MAS has played nicely and given us the tightest variance of the actual SSB compared to interest rates of the benchmarks. Unequivocally, the Jan issue was in all ways better than the Dec issue. I hope anyone that have read my article and followed my logic decided to postpone their subscription for the Dec issue and applied for the January issue instead. It's almost a 10bps advantage across the entire curve.

Anyway, moving onto the next SSB, we use the same old-fashioned method of looking up the data from MAS and constructing the table below. As a refresher, the current month's rates are used as a proxy for the issue in 2 months time. (Dec 2015 rates are used for the Feb 2016 issue)

With 18 out of 22 data points available for this estimate, I think that this is quite reasonably accurate. However, you might notice a trend of dropping rates, so I wouldn't be surprised if we end the month with average yields lower than expected. I would hazard a guess of 0.95 / 1 / 1.90 / 2.45 as the final yields.

Basically, we are on set to have weak 5 and 10 year yields on this issue, on par with the Dec 2015 issue. We are also looking at weak 1 and 2 year yields, on par with the maiden Oct 2015 issue. If I had to opine, I would think that this is overall one of the weakest issues set to be issued.

I will be subscribing for the current Jan 2016 issue for the pretty attractive short term rates and acceptable long term rates. I would very likely be giving the upcoming Feb 2016 issue a pass.


  1. Thanks for sharing.
    I just donated a small sum of $10.

  2. Hi GMGH
    Merry Christmas and a Happy New Year to you.
    I am following your review on SSB because I have missed the Nov 2015 (?) issuance that gave the highest yield (so far).
    For me, the SSB is for long-term as I plan to hold it till maturity.
    Also, due to the shocking low take-up rate, "closing down" this instrument MAY be possible ?!?

    1. Hi starlight,

      Thanks and I hope you had happy holidays too! Yes, the Nov 2015 issue did have the highest 10 year yield so far.

      I think you would have gotten the full amount you applied for, take-up rate was just under 15% for the Jan 2015 issue!

      I think that it is unlikely that they will close down this instrument. On the government's part, it looks great for them to be able to pull this inexpensive rabbit out of their hat every once in a while to remind the public that they shouldn't cry "foul play" for being too lazy or ignorant and not taking advantage of government programmes.

      I do think that they were a bit stingy on the yields considering that only individuals can take advantage of them and a limit was in place. It would've served their (social engineering) purpose much better if they restricted the limit more and gave more attractive yields instead. I guess they didn't want to rock the markets too much.

  3. The interest rate is going down trend. With Fed rate hikes, most likely future yield of the Singapore saving bonds is going to be lower.

    1. Hi Sweet Retirement, that is a tough call to make! If interest rates indeed go down, I'm glad to be owning some of these SSBs, especially as time goes by and my coupons step up!

      On the flip-side, if interest rates do rise, I could also just rollover into a new issue. The SSB really is something more people ought to be aware of in my opinion.


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