Monday, April 25, 2016

Singapore Savings Bond: Apr 2016 Review, June 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.

I have made a similar posts in previous months, and I think I will stick with this format.

First up is update of the subscription of the previous issue. As previously mentioned, the SSB will probably have $300 million available to be issued every month of 2016. 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, so it makes sense to cut down on the total offer to boost up the fill rate. It looks a look less sad now.


For the Apr 2016 SSB, a pathetic take up rate of just under $20 million was done. That's almost 6% of the issue. Demand for SSBs look low to actually even decreasing in the future. By just looking at the absolute amount, you can see that demand is falling. Many credit the falling and unattractive yields and I would not disagree


This month, again, as expected, the yield curve was manipulated by moving the 1 year rate down to match the 2 year rate. Of course, having a yield curve inversion is a no-no. This move is similar to what happened for the Dec 2015 issue last year, but of a much smaller magnitude. The 5 year rate strangely showed a higher than normal deviation from its predicted value.

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 (For example: Apr 2016 rates are used for the June 2016 issue). Also, if you are in the first 3/4 of the current month, you application this month is for the bond that is too be issued on the 1st of next month (For example: Apr 2016 applicants will receive the June 2016 issue). I hope this clears up some of the confusion people have regarding the names of the issues.


There are 16 out of 21 data points available for this estimate, making this estimate slightly less accurate than the previous month. I would hazard a guess of 0.90 / 0.95 / 1.60 / 1.95 as the final yields.

Finally, this month we will not be seeing a yield curve inversion. To me, short end rates have fallen drastically over the past few months.  From a high of 1.2%, if we post 0.90% we're looking at a 25% drop in yields in a short span of just 6 months. Although no yield curve inversion is a sign that things aren't that bad, the general drop across yields through all timeframes is also not a good sign either.

This upcoming issue looks set to be the weakest SSB issue since it has started. All time lows across all the timeframes should be posted in the next issue. The current month's issue is definitely better than next month's issue, if your decision were really that simple and binary.

I would not be applying for this month's issue, and I'm 99% I will not be applying for next month's one as well.

5 comments:

  1. I was looking for some effective trading news then I visited your blog and found the given information very helpful.

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  2. Yield is like sai now...heng I applied first one

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  3. I am still waiting for a better yield before buying. Tks GMGH for your monthly analysis.

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  4. The yields all like sai like that... they sure make those retail bonds look rather attractive, don't they? I hope they go up!

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