As one of the few remaining triple-A credit-rated governments in the world, bonds and bills that the Singapore government issues are naturally highly sought after, particularly during a volatile and high-interest rate environment.
There are a few different types of bonds and bills that individuals and institutions can invest in. While all of these instruments can be referred to as Singapore Government Securities, they do differ from one another.
Singapore Government Securities (SGS) Bonds
Singapore Government Securities (SGS) bonds are tradable debt securities that pay a fixed, semi-annual coupon. SGS bonds have typical maturities of 2, 5, 10, 15, 20, 30 or 50 years. Being tradeable means that you can buy and sell such bonds on the secondary market (i.e. from another investor) instead of only purchasing it from the Singapore government.
There are three categories of SGS bonds. They are the SGS (Market Development), SGS (Infrastructure) and Green SGS (Infrastructure).
The SGS (Market Development) is the most common type of SGS that most of us would be familiar with. They are issued by the government with the primary objective of developing the domestic debt market in Singapore. The maturity for these bonds usually ranges from 2 years to 30 years.
The SGS (Infrastructure) & Green SGS (Infrastructure) are newer types of bonds that are issued under the Significant Infrastructure Government Loan Act 2021 (SINGA). These bonds are meant to finance major, long-term infrastructure development. The maturity of these bonds can be as long as 50 years.
One key difference between the SGS (Infrastructure) & Green SGS (Infrastructure) bonds and other types of Singapore government securities is that the funds received from the issuing of the SGS (Infrastructure) & Green SGS (Infrastructure) bonds can be used to finance government projects.
Treasury Bills (T-bills)
T-bills are also a type of Singapore Government Securities with the key distinction being that they are short-term in nature. The government issues 6-month and 1-year T-bills. Instead of paying a semi-annual coupon like the longer-term SGS, T-bills are issued at a discount to their face value with investors receiving the full face value of the bond at maturity.
This means that the difference between the issue price of these T-bills and the face value of the bond is the return that investors get.
For both the SGS Bonds and T-bills, investors can invest using cash, SRS funds or CPF Investment Scheme funds to invest.
Singapore Savings Bonds (SSB)
Introduced in 2015, the objective of the Singapore Savings Bonds (SSB) is to provide individual investors with a long term savings option that offers safe returns. The SSB hopes to encourage individuals to save and invest to meet their long term financial goals and retirement needs. Individuals aged 18 and above can apply for it for a maximum holding of $200,000.
Unlike the SGS Bonds and T-bills, SSBs are non-traded securities that protect individuals from capital loss. Investors can redeem the bonds from the Singapore government at any point in time, with their principal repaid along with any accrued interest. The SSBs are non-tradeable which means we can’t buy or sell them on the open market to other investors.
Special Singapore Government Securities (SSGS)
The Special Singapore Government Securities (SSGS) is a non-marketable bond that is primarily issued to the CPF Board.
Under the arrangements between the Singapore Government and the CPF Board, surplus CPF funds are placed with the Government through the central bank, the Monetary Authority of Singapore (MAS), for subscription of SSGS.
Singapore Government Securities Are Backed By The Singapore Government
All of the abovementioned bonds and bills that are issued by the Singapore government are also backed by the Singapore Government. This means that the government will have to pay the capital plus interest to investors.
With the exception of the SGS (Infrastructure) & Green SGS (Infrastructure) bonds, which are used by the government to fund long-term development projects, all of the borrowing proceeds from the issuances of these government securities are invested. Under the Government Securities Act, the monies raised from the Singapore Government Securities cannot be spent.
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