Singapore Savings Bonds (6) – Third Tranche

Subscription rate fell to just 3.4%.

The result of the third tranche of the Singapore Savings Bonds (SSB) was announced via an advertisement in the Straits Times today.

Out of $1,200,000,000 available on offer, only $40,987,500 was allotted. This subscription rate was mere 3.41%.

The application rate for second tranche was 21.44%. The first tranche was better at 34.43%. The third tranche was the worst.

The following is a table on interest rates of each year for all three tranches.

Year Interest rate (p.a) %
1st tranche 2nd tranche 3rd tranche
1 0.96 1.18 1.15
2 1.09 1.20 1.15
3 1.93 2.06 1.65
4 2.93 3.10 2.41
5 3.25 3.40 2.81
6 3.25 3.40 2.81
7 3.25 3.40 2.93
8 3.25 3.40 3.08
9 3.30 3.44 3.29
10 3.70 3.83 3.64

The next table is the average p.a. return if the bond is held to that year.

Year Average rate of return (p.a) %
1st tranche 2nd tranche 3rd tranche
1 0.96 1.18 1.15
2 1.02 1.19 1.15
3 1.32 1.48 1.31
4 1.71 1.87 1.58
5 2.01 2.16 1.82
6 2.20 2.35 1.97
7 2.34 2.49 2.10
8 2.44 2.59 2.21
9 2.53 2.68 2.32
10 2.63 2.78 2.44
Subscription 34.43% 21.44% 3.41%

If SSB were held for full ten years (to maturity), tranche 1 pays out 2.63% p.a.; tranche 2 pays out 2.78% p.a. and third tranche pays out 2.44% p.a. Clearly tranche 3 has the lowest payout.

If SSB is compared with some fixed deposits (FD) of some banks, the FDs had better interest rates for year 1. Investors appeared to be sensitive to interest rates and weren’t too excited about SSB. Is there a need to re-think the Singapore Savings Bonds after three issues so far?

Copyright © 2015, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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