I guess many are looking forward to Singapore Savings Bonds. While much has been discussed, I would like to just share some of my thoughts.
On surface, this is an very attractive and 'almost risk-free' investment tool. If you compare it against Fixed Deposit, the Bonds will deliver higher return (guidance effective 2-3% pa) if you keep it to maturity. However, if you redeem it earlier, the effective interest rate could be lower than the normal Fixed Deposit.
10 years is a long period of time. A few scenario could happen. The interest rate could rise, stay the same or fall (though the downside room is limited). The investor may need the cash back earlier and not able to keep it maturity.
This brings to the important point. Unlike other bonds which can be traded openly, this bond can only be sold back to MAS at par value plus accrued interest. The biggest disadvantage of this is that you lose the market mechanism to price it accurately to reflect its future earning (step up interest). Imagine after you hold the bond for 5 years at low interest rate, you need the money, but this is when the interest rate starts to step up. If this were to be an openly traded bond, all else equal, the bond price will be higher than par.
Showing posts with label bond. Show all posts
Showing posts with label bond. Show all posts
Monday, July 27, 2015
Monday, July 12, 2010
PUB refinances bond one year ahead?
Based on this announcement, PUB issues $400million bonds in July 2010 to refinance a bond expiring Aug 2011.
It is not stated whether the 2011 bond was called. If it is not, PUB would be paying more than $12million interest ($400million x 3% = $12million) to get the fund available one year ahead of time. Quite expensive? Or PUB foresees the cost of fund to increase significantly over next one year?
http://business.asiaone.com/Business/News/Story/A1Story20100712-226601.html
PUB launches issuance of $400 million fixed rate bonds
Mon, Jul 12, 2010
AsiaOne
PUB, Singapore's national water agency, has launched the new issuance of $400 million 12-year fixed rate bonds.
The issue date for the 12-year bonds, which has a coupon rate of 3.012% per annum payable semi-annually in arrear, is July 12, 2010.
These are issued in denominations of $250,000 and offered to investors pursuant to exemptions under Sections 274 and/or 275 of the Securities and Futures Act, Chapter 289 of Singapore.
DBS Bank Ltd will serve as the lead manager for the bonds, whose approval-in-principle has been granted on July 7 by the Singapore Exchange Securities Trading Limited for the listing and quotation of the 12-year bonds on the SGX-ST.
Proceeds from the issue of the 12-year bonds will be used to refinance the bonds of PUB that are maturing in August 2011.
It is not stated whether the 2011 bond was called. If it is not, PUB would be paying more than $12million interest ($400million x 3% = $12million) to get the fund available one year ahead of time. Quite expensive? Or PUB foresees the cost of fund to increase significantly over next one year?
http://business.asiaone.com/Business/News/Story/A1Story20100712-226601.html
PUB launches issuance of $400 million fixed rate bonds
Mon, Jul 12, 2010
AsiaOne
PUB, Singapore's national water agency, has launched the new issuance of $400 million 12-year fixed rate bonds.
The issue date for the 12-year bonds, which has a coupon rate of 3.012% per annum payable semi-annually in arrear, is July 12, 2010.
These are issued in denominations of $250,000 and offered to investors pursuant to exemptions under Sections 274 and/or 275 of the Securities and Futures Act, Chapter 289 of Singapore.
DBS Bank Ltd will serve as the lead manager for the bonds, whose approval-in-principle has been granted on July 7 by the Singapore Exchange Securities Trading Limited for the listing and quotation of the 12-year bonds on the SGX-ST.
Proceeds from the issue of the 12-year bonds will be used to refinance the bonds of PUB that are maturing in August 2011.
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