Common sense will say that FD rate will confirm increase, so FHR based home rate could be not so rosy afterall.
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SINGAPORE: More details have been released on the proposed Singapore Savings Bonds, a unique and low-risk product for individual investors. The bonds are aimed at providing a long-term savings option for Singaporeans, and as a way to help diversify their investments.
In a news release on Monday (Mar 30), the Monetary Authority of Singapore (MAS) said the Savings Bonds programme - which will only be available for individuals - will be launched in the second half of this year.
Investors can put in a minimum of S$500, and in subsequent multiples of S$500, for 10 years. There will be a limit to the total investment amount so that it can maximise participation and to ensure a broad reach, said MAS.
Investors can opt for a monthly issuance of their money, and they can choose to withdraw all of their money any time, with no penalty. The principal sum and any accrued interest will be paid to them, if they choose to redeem their funds. This means investors need not have to decide upfront on how long they wish to invest.
Mr Vasu Menon, vice president of Wealth Management at OCBC Bank, said: "Relative to Singapore Government securities, the Singapore Savings Bond is very attractive, because it is able to offer the same yield for a similar tenure, without the risk of capital depreciation.
"You enjoy the yield, plus when you get out or redeem within that two-year period, you do not suffer the capital loss. This is a very important feature of the bond, because it offers investors psychological comfort, psychological security and it gives them an avenue to get out whether they lose money or otherwise."
Those in the Savings Bonds programme will earn interest that is linked to long-term Singapore Government Securities (SGS) rates. The Savings Bonds’ interest rates will increase over time. This means the average interest rate will be higher the longer the Savings Bonds are held. The SGS yield for the last 10 years has been between 2 and 3 per cent per annum, said MAS.
Given the way the bond encourages long-term investment with attractive rates, industry watchers added they expect the new Savings Bonds to put pressure on banks' fixed deposits (FDs).
Said Mr David Gerald, president and CEO of the Securities Investors Association (Singapore): "What this Savings Bonds will do immediately is provide competition for FDs. Banks must now start thinking on how to do better.
"They are not doing well, they are providing very little. This will provide a good competition for FDs and I think banks must also encourage their clients to bring this into the investment asset allocation portfolio."
The interest rate schedule for each Savings Bond issue will be announced before the applications open. The interest will be paid every six months.
Furthermore, the Savings Bonds programme is principal-guaranteed, which means investors will always get their investment amount back in full.
The MAS said it will provide information on how to apply for the Savings Bonds programme closer to the launch date.
- CNA/xq/ms