Singapore T-Bills and Bonds

What are Singapore Treasury Bills and Bonds

Singapore Treasury Bills (T-bills) and bonds, collectively know as Singapore Government Securities (SGS), are offered by the Singapore Government to the public and institutional investors. You can think of Bonds and T-bills as a loan from the Singapore Government to the public. Bonds are widely accepted to be safe haven for cash as they are backed by the issuing government.

• The government will pay the holders of SGS a fixed sum of money on the maturity date
• You cannot cash in your SGS before the maturity date
• These SGS can be traded in the open market

 

Treasury Bills

 

1. These are short term securities that mature in a year or less from their issuing date

• 3 months, 6 months, 12 months

2. They are bought at a discount to the par value and upon maturity, holders are paid the par value.

• For eg, You purchase a $1000 T-bill for $970 and you will get back $1000.
• Your earnings of $30 will reflect a yield/interest rate of 3%

3. T-bills are sold in denominations of $1000 via auction

4. Interest earned is tax exempt

5. Can be bought under CPF Investment Scheme

6. Held via the Central Depository (CDP)

7. The different issue codes are listed below

Bonds 

 

1. They are long term securities that mature more than a year from their issuing date

• 2, 5, 10, 15, 20, 30 years

2. Interest rate earned is via a fixed coupon rate

3. Semi annual repayments to the bond holder

4. Bonds are sold in denominations of $1000

5. Interest earned is tax exempt

6. Under CPF Investment Scheme

7.Held via the Central Depository (CDP)

Calculating your bond Returns 

 

Current bond yield is a reflection of the annual coupon interest to its current price

• If you bought a bond at a fixed coupon rate of 4% your fixed return annually on a $1000 bond will be $40 (0.04 x $1000).
• If the price of your bond was to increase to $1200, your current yield would decrease to 3.3% ($40/$1200 x 100%)
• If the price of your bond was to decrease to $800, your  current yield would increase to 5% ($40/$800 x 100%) 
• Bond yield move together with interest rates

Total Bond Return

•  If you bought a bond at a fixed coupon rate of 4% your fixed return annually on a $1000 bond will be $40 (0.04 x $1000).
• If you sold your bond at a price of 1020, your total return would be 6% ($60/$1000 x 100%). Annual repayment of $40 + Appreciation of bond price $20
• If you sold your bond at a price of $980, your total return would be 2% ($20/$1000 x 100%). Annual repayment of $40 - Depreciation of bond price of $20.

From the above, it is important to note that

• Bond price is affected by interest rates
• As the interest rates increase, bond yield would increase
• As your bond yield increases, its market price would decrease

Useful links
SGS Issuance Calendar
Daily and Historical Prices
Bond Yield Calculator