Monday, May 11, 2015


Ouch ouch, hot hot! Fresh off the press! Click here for the official MAS release.

  • 18 years old
  • CDP account
  • Banks accounts with either DBS/POSB, OCBC or UOB

Purchase / Redemption request period: From the 1st day of the month until 4 business days before the end of the month.

Processing date: 3 business days before the end of the month, which is why orders close 4 days before.

Bond Issue date: Bond will be issued on the 1st business day of the month
Bond Redemption date: The redemption amount will be credited by the 2nd business day of the month

Application / Redemption fee: $2 per transaction, redemption waived if matured after 10 years.
Minimum purchase: $500
Maximum purchase: $50,000
Individual limit: $100,000
Partial redemption is allowed in blocks of $500  

Returns: Dependent on holding period, but would be similar to an SGS bond

Interest will be paid every 6 months from the purchase of the bond date. For example, applying for an SSB in January, you will receive it on 1st Feb and your interest will be paid semi-annually every 1st July and 1st Feb until maturity.

Now, here comes the really interesting bit that you can find in the FAQ if you are a freaking nerd like me.

Paging Mr 15HWW!! Haha, yes, we can redeem the SSB at par, then reinvest with 1 month lag. However, the sentence after that gives us the flipside of that situation. The lower initial payments might not outweigh the higher current coupons that you would be giving up to make that switch.

I have talked about the Singapore Saving Bonds before, and I think this is in line with what I expected, except for the extremely large individual cap of $100,000. I am quite stunned about that number.

Now that almost all the variables are known (save the 3 local banks to show their fees and dangle promotions), I think it is time that some smart local bloggers come up with the optimal solution to milk these SSBs for what they are worth! To point y'all in the right direction, Kyith from InvestmentMoats showed a link to FSM's SGS bond page which shows duration to maturity and current yield. A good place to start crunching numbers, yeah? I want to know what is the best strategy to begin buying the SBB if I had $100,000 right off the bat, plus how I should know if I should sell and roll over an existing SBB into a new issue. Gamsia!

While this SSB is no doubt a good product, I still think that it has to be said that they are not exactly the same as fixed deposits, SGS bonds or even CPF. Different financial instruments have different uses. There is no single holy grail that gives you all the pros and none of the cons. Bear in mind that the CPF SA starts out with a freaking high interest rate of 5%. The catch? That becomes your retirement money, haha.

The timing of this SSB works out just nice for me. Soon my 1.5% fixed deposit with POSB is going to mature, and I will be able to shift around my cash here and there. Oh, mid-year bonus also! Ho ho!

Oh, this has just made my life so much more exciting. I'm counting on you other smart bloggers to come up with a solution and maybe a calculation formula to know if it is more worth it to sell and roll over into a higher interest rate SBB.


  1. i wonder if it makes sense to do a bond ladder with this...

    1. Hi Steven, I do not think that a bond ladder would make sense if future rates go down, and would only make sense if rates go up higher than a certain amount.

      To be clear, the scenarios are as such:
      No bond laddering: Whack $100k, hold til maturity
      Bond laddering over 10 years: Whack $100k first year, then sell $10k and reinvest into new rate every year

      If rates are going down, it would not make sense at all to ladder the SSBs. Why would you sell your higher rate bond for a lower rate one?

      However, if rates move up, then it MIGHT make sense to see if it is worth it to sell and roll up into a higher yield. That is what Mr 15HWW and I are talking about in the comment below.

      Another reason why people use a bond ladders is because holding the bonds until maturity ensures that there will never be nominal losses since maturity returns par value. However, in the SSB case, it is always redeemable at par value, so that benefit of the bond ladder is made null. There is no need to worry that if you sell your SSB, you would realize a loss.

  2. Hi GMGH,

    Yeah, there is indeed a free put option. I talked to some people involved in this product from MAS the other day and they confirmed my hunch. The flip side is not the lower initial payments, since if I hold for 10 years, it makes more sense to hold the one with a higher interest rate.

    The catch is there is no guarantee you will be allocated your "ideal amount of bonds" during the next month's launch. So if there is a small interest rate change (likely the case), it might be "risky" to arbitrage it since no guarantee you can buy it back unless it's a small amount.

    But then if it's a small amount, no point arbitraging?

    1. Aye Mr 15HWW, because of the allocation, that does make things a bit more tricky. Perhaps we need to wait for the auctions to see if they really sell like hotcakes to the general public, or if it is only personal finance bloggers like us are fighting to buy them tooth and nail, ahaha!

      I'm not sure if rolling into higher yields would help maximise the total long term returns of using the SBB in every instance. I am sure if it is only a small amount, it would not make sense. However, I am sure that there is a breaking point where it would most certainly make sense to sell current holdings and roll into a higher yield.

      The question is when?
      I think the variables are:
      1) shape of the yield curve of current SSB until maturity
      2) shape of the yield curve of possible new SSB until full 10 years

      Then after that we have to use calculus to see if we race both horses together, which one will have a larger area under the curve (more total returns). This means that the yield curve of the new SSB must cut above the current SSB before it matures. The only question is whether it cuts high enough that rolling over enhances total returns (area under the curve is larger).

      I totally need to do some calculations to see if my hypothesis makes sense. Heh, if it does, I shall call it the GMGH SSB Rollover Test! CHOPE!

    2. Hi GMGH,

      Good exchange with you! You are absolutely right about the area under the yield curve, especially with the step-up nature of the SSB product.

      We shall observe together in the coming months. =)


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