View Full Version : singapore savings bonds
martialsin
23-07-15, 11:32
REverse QE?
REverse QE?
SSB is a product that government created to provide the average Singaporeans an avenue to invest in a relatively risk free asset.
There are many social reasons to introduce SSB. Among the obvious is to have decent return for your savings to hedge against inflation. The other social cause is to provide another avenue for Singaporeans to invest other than putting all their savings into their HDB flats. As there is a limit to our economic growth given our land size and population, going forward, HDB flats may not be the best form of "asset investment" which was the what the government was advocating in the earlier years.
The SSB is more a reversal of the government's policy of asset enhancement through "investing" in HDB flats in the earlier years.
The SSB is a result of local needs rather than in response to QE or the reversal of QE that are happening around us. The government will have to "wisely" reinvest in our "contributions" into SSB for higher returns globally.
another form of money printing.
I give you a piece of paper call Bond in exchange for your piece of paper call money.
Government selling bonds has the effect of reversed QE cause money is now in the hands of government and not the consumers. Intent of QE is to create cheap money hoping consumers to spend more to help the economy like what the U.S. did.
In our case, the money is old money and not new money hence no effect of QE.
Think you got the concept wrong....
Govt buying back bonds, they print money (else where to find money to buy) to pay to you, more money in circulation in the open market chasing after limited goods........ - This is called "QE"........
QE has the effect of causing inflation in the long term, good for property prices!
Govt issue paper called bonds in exchange for your money, govt keep the money means less money in circulation in open market and less money to put in banks as deposits, means banks have less money to loan out....... - This is similar to "Reverse QE"..............
Reverse QE has effect of pushing up interest rates, depreciating property prices...............
While QE generally will cause inflation in the long term, Reverse QE could cause deflation in the long term.............
another form of money printing.
I give you a piece of paper call Bond in exchange for your piece of paper call money.
I finally understand what you are trying to say. Keep up the good work!
But does Govt really store/keep the money or they will reinvest it somewhere, inadvertently heating up some other area?
Think you got the concept wrong....
Govt buying back bonds, they print money (else where to find money to buy) to pay to you, more money in circulation in the open market chasing after limited goods........ - This is called "QE"........
QE has the effect of causing inflation in the long term, good for property prices!
Govt issue paper called bonds in exchange for your money, govt keep the money means less money in circulation in open market and less money to put in banks as deposits, means banks have less money to loan out....... - This is similar to "Reverse QE"..............
Reverse QE has effect of pushing up interest rates, depreciating property prices...............
While QE generally will cause inflation in the long term, Reverse QE could cause deflation in the long term.............
Think you got the concept wrong....
Govt buying back bonds, they print money (else where to find money to buy) to pay to you, more money in circulation in the open market chasing after limited goods........ - This is called "QE"........
QE has the effect of causing inflation in the long term, good for property prices!
Govt issue paper called bonds in exchange for your money, govt keep the money means less money in circulation in open market and less money to put in banks as deposits, means banks have less money to loan out....... - This is similar to "Reverse QE"..............
Reverse QE has effect of pushing up interest rates, depreciating property prices...............
While QE generally will cause inflation in the long term, Reverse QE could cause deflation in the long term.............
Interesting theory "Govt issue paper called bonds in exchange for your money, govt keep the money means less money in circulation in open market and less money to put in banks as deposits, means banks have less money to loan out....... - This is similar to "Reverse QE""
Govt take the money and put under the mattress so they can pay you 2 to 3 % interest.
I finally understand what you are trying to say. Keep up the good work!
But does Govt really store/keep the money or they will reinvest it somewhere, inadvertently heating up some other area?
If the government has not taken the money, these same money would be loan out to corporates or consumers for their investments or consumption in the form of cheaper loans. The government now has to reinvest these money with returns hopefully higher than what they are paying to its bond holders. There is no new money or cheaper money in circulation.
This is immaterial as long as they feel that paying you 2-3% interest gives them more "benefits" in terms of satisfaction from the people and more vvvvv.......................
They can easily earn back these interests paid from ABSD or COEs or raising petrol duties or raising GLS land prices or even GST etc............ :eagerness:
Interesting theory "Govt issue paper called bonds in exchange for your money, govt keep the money means less money in circulation in open market and less money to put in banks as deposits, means banks have less money to loan out....... - This is similar to "Reverse QE""
Govt take the money and put under the mattress so they can pay you 2 to 3 % interest.
Interesting.
Got comment = caps bold red font with lots of full stop
No comment = immaterial
The Fed had indicated increasing interest rate by end 2015. The timing of the SSB in Oct is not so ideal as both events are going to increase local interest rate even more. Local banks will have to increase deposit rates as they compete for the same pool of depositors with SSB. Expect your mortgage rates to increase more than you expect.
If the government has not taken the money, these same money would be loan out to corporates or consumers for their investments or consumption in the form of cheaper loans. The government now has to reinvest these money with returns hopefully higher than what they are paying to its bond holders. There is no new money or cheaper money in circulation.
But if Govt reinvests the money, surely the money has to go into circulation somewhere (increase specific Govt sector, commercial, infrastructure, HSR, crown jewel at Changi etc) that helps it generate more money. If our Govt like to lock our money and pay us interest, they would have done so since long time ago.
So what does the Govt invest in?
The Fed had indicated increasing interest rate by end 2015. The timing of the SSB in Oct is not so ideal as both events are going to increase local interest rate even more. Local banks will have to increase deposit rates as they compete for the same pool of depositors with SSB. Expect your mortgage rates to increase more than you expect.
That may well coincide with the weak holders of multiple properties releasing their units at a discount. But still not for sure that people waiting to buy can qualify based on the increased interest rates.
The ones who will really celebrate are those ready with hordes of cash.
Possible scenario, but not for sure. Much will have to depend on the qualities of those holding multiple properties.
At the same time, we also know there will likely be manpower changes and other subtle changes already in place. We might end up in a place where interest increases and prices largely remain except for those in extreme conditions.
But if Govt reinvests the money, surely the money has to go into circulation somewhere (increase specific Govt sector, commercial, infrastructure, HSR, crown jewel at Changi etc) that helps it generate more money. If our Govt like to lock our money and pay us interest, they would have done so since long time ago.
So what does the Govt invest in?
The government is likely to let GIC,Temasek or other bodies to invest in a portfolio of assets globaly. The fact that money is taken out of the market which would otherwise flow to corporates and consumers to invest or spend has the effect of reversed QE. With SSB, government pays higher interest to bond holders and banks pay higher interest to depositors and force interest rates to rise. The money reinvest by the government has no effect on the domestic front.
bargain hunter
23-07-15, 22:04
"MAS Managing Director Ravi Menon played down fears the bond will cannibalise bank deposits.
"The savings bonds issuance numbers pale in significance compared to the total size of the banking deposits," he said at a news conference this week."
couldn't the government at the same time be issuing less traditional bonds to the corporates, banks, and high net worths?
personally, i feel that the government is just offering this to the older generation who are not high networths who would otherwise have just left their savings in the banks. the cap for each individual for ALL the bonds issued is 100k. i feel that at worse, there is only a slight increase in cost of funds for the banks. i do not think that taking 6b per year out of 560b of deposits in the banking system will have such a big impact.
Bank do not need your deposit in order to loan you the money,
Probably as some of you pointed out, this appears more of a social strategy to help the low and middle income access a slightly higher interest product.
But banks might also be forced to either increase interest rates to draw more funds, or according to Arcachon try to loan out more to the affluent (moderating car and property loan interests perhaps). It will be an interesting scenario if that were the case, where the poor gets better interest gains while the more affluent get even lower interest rates...
Too complex for my mind.
The gov is taking over some of the money printing machine.
another form of money printing.
I give you a piece of paper call Bond in exchange for your piece of paper call money.
Aiya anything to you is QE lar! The FED increasing funds rates at year end is also QE to you... so... just plunge all into properties yar?!
Hehe! Jia lat lar you!
In the US, the FED bought up 4.4T of bonds by printing money. In SG now, govt is telling the ppl to buy up their bonds. You and I ain't printing press so that's a reverse QE. Sucks up liquidity. Get ready for the plunge in OCR prices (way overdue for correction). Only the rich with holding power and huge war chest can hold out this period.
In the US, the FED bought up 4.4T of bonds by printing money. In SG now, govt is telling the ppl to buy up their bonds. You and I ain't printing press so that's a reverse QE. Sucks up liquidity. Get ready for the plunge in OCR prices (way overdue for correction). Only the rich with holding power and huge war chest can hold out this period.
To be accurate, it sucks up maximum of 100K per person. Per household maybe 200K.
Maybe this is another secret cooling measure to ensure that cooling continues?
I think the effect is on every group if that is the case. OCR affected will pull RCR which will pull CCR down too.
Supposing a household has 200K cash and 100K CPF extra, will they find it more meaningful to place a deposit for a $1 million property (plus taxes), or keep in CPF and SSB for 2-3% interest?
bargain hunter
23-07-15, 23:54
u made it sound like it is more meaningful to place a deposit for a property than to put it in SSB even though u probably did not intend it that way. :)
Supposing a household has 200K cash and 100K CPF extra, will they find it more meaningful to place a deposit for a $1 million property (plus taxes), or keep in CPF and SSB for 2-3% interest?
u made it sound like it is more meaningful to place a deposit for a property than to put it in SSB even though u probably did not intend it that way. :)
Nope, no specific meaning intended. Really for consideration.
Supposing first-timers without property (singles, divorcees etc)
Supposing second-timers who can decouple.
Supposing second-timers who cannot decouple.
Supposing third-timer and so on.
What would their decisions be like?
To be accurate, it sucks up maximum of 100K per person. Per household maybe 200K.
Maybe this is another secret cooling measure to ensure that cooling continues?
I think the effect is on every group if that is the case. OCR affected will pull RCR which will pull CCR down too.
Supposing a household has 200K cash and 100K CPF extra, will they find it more meaningful to place a deposit for a $1 million property (plus taxes), or keep in CPF and SSB for 2-3% interest?
It is not a cooling measure. It is a reversal of its earlier years housing policy that your HDB flat is an assent and its value grow with time. With our aging HDB flats (mostly built in the early 80s') and the slower growth of our economy as a matured economy, the HDB flat cannot continue to rise its value despite its age and slower growth. SSB is in effect a "scheme" to replace the assent enhancement scheme because it is no longer relevant. The Lease Buy Back (LBB) scheme is another scheme to help flat owners to unlock the value of their HDB flats now while the value is still high. The LBB scheme will one day become irrelevant when the value of the aging HDB flats no longer hold.
Please refers to my earlier quote below.
SSB is a product that government created to provide the average Singaporeans an avenue to invest in a relatively risk free asset.
There are many social reasons to introduce SSB. Among the obvious is to have decent return for your savings to hedge against inflation. The other social cause is to provide another avenue for Singaporeans to invest other than putting all their savings into their HDB flats. As there is a limit to our economic growth given our land size and population, going forward, HDB flats may not be the best form of "asset investment" which was the what the government was advocating in the earlier years.
The SSB is more a reversal of the government's policy of asset enhancement through "investing" in HDB flats in the earlier years.
The SSB is a result of local needs rather than in response to QE or the reversal of QE that are happening around us. The government will have to "wisely" reinvest in our "contributions" into SSB for higher returns globally.
In the US, the FED bought up 4.4T of bonds by printing money. In SG now, govt is telling the ppl to buy up their bonds. You and I ain't printing press so that's a reverse QE. Sucks up liquidity. Get ready for the plunge in OCR prices (way overdue for correction). Only the rich with holding power and huge war chest can hold out this period.
Interesting, when you print money it is not QE and when you print money property price plunge ???????
Question 4.4T where did this money from.
If from the Bank where is the deposit from.
If no deposit how was it created.
Do you understand now Bank don't need your deposit to loan money.
FED don't need the money to create Bond.
martialsin
24-07-15, 10:13
To be accurate, it sucks up maximum of 100K per person. Per household maybe 200K.
Maybe this is another secret cooling measure to ensure that cooling continues?
I think the effect is on every group if that is the case. OCR affected will pull RCR which will pull CCR down too.
Supposing a household has 200K cash and 100K CPF extra, will they find it more meaningful to place a deposit for a $1 million property (plus taxes), or keep in CPF and SSB for 2-3% interest?
With dropping rental, the only way for property to maintain a yield above these 2 -3% is for prices to drop.
martialsin
24-07-15, 10:16
CPF and SSB is not the main competitor for liquidity. These comes from the private bank fd which have to provide higher interests than SSB.
bargain hunter
24-07-15, 11:30
should be pretty clear cut? only if don't pay 7% or more stamp duty, ppty is a good choice. the rest can lend the gahmen 100k per pax. :)
Nope, no specific meaning intended. Really for consideration.
Supposing first-timers without property (singles, divorcees etc)
Supposing second-timers who can decouple.
Supposing second-timers who cannot decouple.
Supposing third-timer and so on.
What would their decisions be like?
should be pretty clear cut? only if don't pay 7% or more stamp duty, ppty is a good choice. the rest can lend the gahmen 100k per pax. :)
I totally agree.
Not entirely convinced if this is negative QE since the main group of buyers (Group 1 and 2) who do not need to pay 10% (7+3%) might still prefer property and because SSB is capped at 100K.
Not entirely convinced if this is negative QE...
alamak it's obviously negative QE in form alright (absorbing the liquidity). The only thing that makes it not an "intentional reverse QE" is simply the size. only 100k max at all time, the total size is negligible. The policy intention is just to help those without much savings to earn a better return on their cash savings. Dun think too much.
Interesting, when you print money it is not QE and when you print money property price plunge ???????
Question 4.4T where did this money from.
If from the Bank where is the deposit from.
If no deposit how was it created.
Do you understand now Bank don't need your deposit to loan money.
FED don't need the money to create Bond.
You're funny sia! Since when did I say FED printing is not QE? Read again.
You remind me of many old ppl that do selective reading (only read what they wanna hear) and believe everything they see on Youtube :biggrin-new:
Sound like Najib. Got say no say people can read,got do no do people also know.
http://www.sgs.gov.sg/savingsbonds/Your-Savings-Bond.aspx
This is call control money printing.
From now on 2 to 3 % inflation, money in the Bank get depreciate 2 to 3 %.
Gone are the days where a property can appreciate from SGD 535,000 to SGD 1,550,000 from 2006 to 2010, this inflation are thing of the past.
50% inflation a year.
Powered by vBulletin® Version 4.2.2 Copyright © 2024 vBulletin Solutions, Inc. All rights reserved.