Singapore Savings Bonds are quickly losing their appeal: analysts

The MAS only received $22.3m in applications.

When Singapore Savings Bonds (SSBs) were first launched in 2015, the bonds received great acclaim from analysts. The Monetary Authority of Singapore (MAS) received only $22.3 million in applications for the SSB issue in June, a measly sum compared to the $300 million maximum amount on offer.

This is also a far cry from the strong investor demand seen for the maiden issue in September last year, for which the central bank received $413.1 million in applications.

Maybank Kim Eng analyst Ng Li Hiang noted that the weak appetite for savings bonds is due to sinking bond yields for Singapore Government Securities (SGS), coupled with competitive fixed deposit rates offered by local banks.

Are SSBs “boring?”

“Rates for SSBs are determined by the average SGS yields. Yields have been coming down for the past five issuances, thereby making SSBs unappealing,” Ng noted.

She added that savings bonds may be unappealing to individuals who are only looking to make short-term deposits. “SSBs are positioned as safe and long-term saving products for individuals.

Early withdrawal will result in lower rates compared to banks’ promotional rates for FDs. As a result, individuals opt for FDs instead,” she notes. UOB analyst Victor Yong echoed this sentiment.

He said yield sensitive investors will likely forgo the SSBs’ redemption flexibility in favour of higher-paying fixed deposit promotional rates. “This is particular for incidences wherein their investment horizon is shorter than 10 years,” he stated. SSBs have a maximum tenure of 10 years and a yield that steps up to match starting SGS every year.