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Applications open for first Singapore Savings Bond

SINGAPORE — The Singapore Savings Bond (SSB) made its debut yesterday as applications were open to investors, but analysts say it is still too early to gauge how well the new investment product will be received by the public.

SINGAPORE — The Singapore Savings Bond (SSB) made its debut yesterday as applications were open to investors, but analysts say it is still too early to gauge how well the new investment product will be received by the public.

The Monetary Authority of Singapore (MAS) yesterday announced that S$1.2 billion of the first SSB will be available for application through Sept 25. The new bonds will be issued on Oct 1, with interest paid twice a year — on April 1 and Oct 1 — the MAS said. Only individuals can apply for the SSBs, which are fully backed by the Government. He or she can invest the minimum sum of S$500 and in subsequent multiples of S$500 up to a maximum of S$50,000 in any single issue.

“It is hard to tell if the amount of S$1.2 billion is too much or too little as this is the first issue of the SSBs,” said UOB economist Mr Francis Tan.

“The lack of awareness of the product on the street level may lead to a not-so-active take-up rate. We will have to wait and see when the application closes.”

The MAS will announce the allotment results of the first issue after 3pm on Sept 28.

Mr Tan noted that the bonds would appeal to a new group of potential savers. “The SSBs cater to a new pool of people that is currently not served — people who have spare cash but may require the money for emergency purposes ... These people would be more hesitant in considering fixed deposits as there would be a penalty fee for early termination. This product would be more suitable for them.”

The interest rates are on a step-up basis: the longer the SSB is held, the higher the returns will be. The bonds have a 10-year tenor and funds can be redeemed early on a monthly basis without penalty.

On the dedicated SSB website at www.sgs.gov.sg/savingsbonds, an interest rate calculator allows an individual to calculate how much interest he or she can get for the amount of money invested. For example, if an individual buys S$10,000 of bonds for this issue and holds the securities for 10 years, the total interest earned is S$2,691. However, if the person decides to withdraw the bonds in the fifth year, the calculator shows that the total interest earned would be S$1,016.

With the launch of the SSBs, banks are likely to see some savers moving funds from their fixed deposit accounts to the new investment product as more bonds are issued on a monthly basis, analysts said, adding that competition would probably start to heat up next year.

“The liquidity impact on fixed deposits will still be okay for this year, but if the continued issuance is at a similar amount monthly then the impact on fixed deposits in banks will be more pronounced in 2016,” said Credit Suisse economist Michael Wan. “This (competition) would be especially so among smaller banks.”

Depending on demand, up to S$4 billion of SSBs could be issued this year, the MAS said. Individuals can apply for the SSBs at the ATMs of DBS/POSB, OCBC or UOB. They must have a bank account with the participating banks and a Central Depository account with direct crediting service enabled. ANGELA TENG

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