Monday, June 27, 2016

Singapore Savings Bond: June 2016 Review, Aug 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 June 2016 SSB, we see the takeup rate once again drop. Just 7% of the offer was issued. Very sad indeed.


This month, there is no the yield curve inversion. The MAS rates continues to show strong levels of prediction to the actual SSB issue, confirming the relationship that we have identified.

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: Jun 2016 rates are used for the Aug 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: Jun 2016 applicants will receive the Aug 2016 issue). I hope this clears up some of the confusion people have regarding the names of the issues.


I would hazard a guess of 0.88 / 0.95 / 1.53 / 2.00 as the final yields.

This upcoming issue looks set to be worse than this current SSB issue. This month's issue is definitely better than the next month's issue, if your decision were really that simple and binary. So if you really want to buy some SSBs and are not sure when, it would be advisable to lock in your order today as opposed to waiting for next month's issue. But in all honesty, the differences would be very minor.

Today is the last day of applications, which closes at 9pm. It can be done through ATMs or iBanking.

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.

9 comments:

  1. hi bro,
    now ssb rates like kanna sai. might as well go corporate bonds :(

    ReplyDelete
    Replies
    1. Might as well savings account

      Delete
    2. Citibank Maxigain account might be able to chut out interests of over 1.5% annually consistently. I'd prefer that over the current SSBs now.

      Even the plain vanilla CIMB Fastsaver is 1% pa with no loopholes or restrictions, which is better than the 2 year yields now.

      Delete
  2. why are you expecting are the bond subscription to get better in the first place? it will just get lesser and lesser, which is expected, as those who wanted would have already entered.

    ReplyDelete
    Replies
    1. Hi Anon,

      I would have assumed that over time, the understanding and the uses of this product would be pushed out to normal people and be better understood so that people would use it as a regular tool in their financial toolkit.

      However, I think that the yields are just too low to entice the regular retail investor right now. For example people nearing retirement, it makes much more sense to put their money into their CPF and get substantially higher interest. At least, I know I would do that instead if my money was for retirement.

      Delete
  3. How to make the yield attractive?

    starlight

    ReplyDelete
    Replies
    1. Hi Starlight,

      I think it would be hard to count on SSBs to give attractive yields given that rates are actually dropping globally. Some banks have cut back on their FD tenures to only have 6, 10 month deposits instead of the usual 12 and 24. I think that this can be a sign that even the banks are not expecting rates to raise in the short term as well.

      Alternatives could be limited tranche endowments if you have a long time period (be very careful with the product!) or step-up fixed deposits if you prefer more flexibility. I like the idea of step-ups, because if I see a good opportunity to move that money from the FD and into the SSB on a good month, I can do so. If not, I still would get decent interest while I wait.

      Delete
  4. Hello, just wondering if you received any payouts already? I got $10k of the Jan issue @ 1.21% for 1st year. Expected $60.5 but got $59.5. Is there a hidden cost somewhere?

    ReplyDelete
    Replies
    1. Hi Anon,

      Yes, I have received payouts for 2 issues already. For the Nov 2015 and the Jan 2016 (same as you) issues.

      I did note that I received slightly less than I expected in both instances. However from what I understand regarding bond payments, this happens because there is a difference between the number of days used in their calculations in the initial 6 months and the later 6 months. I could be wrong, but I would expect that the next bond payment would have slightly more to make up for that and balance things out.

      I will let you know again in November when I get the 2nd half of my 1st issue's payment.

      Delete

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