On 21 September 2021, the Monetary Authority of Singapore (MAS) announced that it will be issuing the first SINGA bonds under the Significant Infrastructure Government Loan Act (SINGA).
The SINGA bonds were first mentioned during the Singapore Budget 2021, when then Finance Minister Heng Swee Keat announced that the Singapore government would issue bonds to finance long-term infrastructure projects, under the proposed Significant Infrastructure Government Loan Act (SINGA). The Act was then tabled in parliament and passed on 10 May 2021, authorising the Government to borrow up to S$90 billion over the next 15 years to finance major, long-term infrastructure, such as new rail lines and coastal protection infrastructure to protect Singapore against rising sea levels.
The general idea behind these bonds is that since these infrastructure developments are meant to benefit future generations in Singapore, it makes sense that the future generations also help bear the cost of these infrastructures. Furthermore, with Singapore’s AAA rating and the current low-interest-rate environment, it’s favourable to tap on the debt market to secure good interest rates to finance long-term infrastructure projects.
Unlike the Singapore Savings Bonds, where there is a maximum individual limit of $200,000 to how much each person can invest, the SINGA bonds will be listed and available for trading on the Singapore Exchange (SGX).
The auction date for this first tranche of SINGA bonds will be on 28 September 2021. Subsequently, it will be listed on the SGX from 1 October 2021. From now till the auction date, you can submit your bid for the bonds through DBS/POSB, OCBC & UOB ATMs and internet banking portals.
Read Also: Step-By-Step Guide To Subscribing To An IPO (Through Internet Banking)
In this week’s edition of 4 Stocks This Week, we can look at 4 things that you need to know about the SINGA bonds that are being issued by MAS.
#1 Minimum Subscription of $1,000 For SINGA Bonds
Under MAS, the SINGA bonds will be named as SGS (Infrastructure) to differentiate from the existing SGS (Singapore Government Securities), which will be re-named as SGS (Market Development). For the first tranche of bonds, the total amount of SGS bonds issued will be $2.6 billion, with the minimum denomination value at $1,000. The first tranche of SINGA bonds will be called NA21200W.
#2 Semi-Annual Coupon Payments
Similar to most other bonds, coupon payments for the SINGA bonds will be paid out semi-annually. For NA21200W, the coupon payment dates will be 1 October and 1 April. However, the interest rates for NA21200W have not been set yet and will only be known on 28 September 2021, after the auction results are announced. The interest rate will be set during the auction and will depend on the level of interest and the competitive applications that are received.
Source: MAS
Editor’s Update: On 28 September 2021, the coupon rate for the SINGA bonds was set at 1.875% p.a.
#3 SINGA Bonds Are Backed By The Singapore Government
Similar to the existing Singapore Government Securities (SGS) that are issued, SINGA Bonds are issued by MAS on behalf of the Singapore government and will be backed by the Singapore government. In other words, these bonds are as safe as they come by (Singapore is one of the few countries with a AAA rating) as they are backed by the assets of the government.
NA21200W is a 30-year bond, which will mature in October 2051. Investors can, of course, trade the bonds on the SGX from 1 October 2021. The government can issue up to $90 billion worth of SINGA bonds so expect more bonds to be issued in the future.
#4 You Can Invest In The SINGA Bonds Via SRS or CPFIS
Besides using cash to invest in these bonds, Singapore investors can also consider investing in the bonds via the Supplementary Retirement Scheme (SRS) or CPFIS. However, given the low-interest-rate environment, one may expect that using CPF savings to invest in these bonds may not give us as high a return as earning the interest rates from CPF.
Do note, unlike the Singapore Savings Bonds, SGS bonds may rise or fall in value before maturity.
Read Also: Complete Guide To Buying Singapore Savings Bonds (SSB)
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