Singapore Savings Bonds

Since the Singapore Savings Bond was launched late last year, the take-up rate has been low. I still do not understand the reasons for such a low take-up rate. It could be due to reasons such as Singapore investors are expecting interest rate to move up a lot more in the coming future or they are able to find investment products with higher return elsewhere. Well, my opinion is that you should take a serious look at this product.

SSB(Singapore Savings Bond in short) is a risk free product that is fully backed by our Government of Singapore. Nothing can be safer than this in this country. It is kind of AAA*** in my own credit rating standard. It has both the features of a 10 year bond as well as an inflation-linked bond. You can hold it to maturity if you like. In circumstances where the interest rate were to go up drastically (if it ever happens), you can redeem the bond at no cost and make use of the redeemed amount to reinvest in the prevailing series with higher interest rate at that point in time. I really cannot find another product that can give you the best of all worlds.

Of course, the argument is that its return is so low (at 2.19% for now). But, you have to remember that this is risk free. If you put your money in the bank, you still have to worry that the bank may close down. And, yes, banks do close down and a lot of banks have closed down since 2008. The chance of banks closing down is always much higher than the chance that our government collapsing and defaulting on the bonds. If you really think our government is going to collapse in the coming month (just a hypothetical example), you can redeem the bond this month without penalty. Try doing that to your fixed deposit in the bank and you will see how much you have to pay to the bank for early redemption.

As for the possibility of our interest rate hitting the roof any time soon, I really have serious doubt about this. You should refer to my blog on 11th Feb, 2014. Interest rate can stay low in Singapore even if Federal reserves were to raise interest rates. We have simply too much cash in the system.

In summary, if you are looking for a risk free and capital guaranteed investment with stable return, look no further. Nothing can beat Singapore Savings bond.