How to Invest in Bonds?
Here are the options for investing in bonds for Singapore retail investors.
Singapore Saving Bonds
Singapore Savings Bonds (SSB), provide a higher return alternative to fixed deposit accounts. You can invest in SSBs from as little as SGD 500. They are issued and backed by the Government of Singapore, which enjoys the highest credit ratings from the world’s top three credit rating agencies.
They are issued with 10-year maturities, but SSB holders can redeem their bonds at any time with no penalties. Unlike corporate bonds, SSBs cannot be sold to another party. They can only be redeemed through the Singapore Government.
The interest rate starts lower and ‘steps up’ over time.
Bond ETFs traded on the SGX
These ETFs offer diversified investment in Asian corporate and Singapore government bonds. They are available in board lots of 100 units. You can also invest in a Singapore bond ETF via a regular savings plan for a minimum of SGD 100/month.
Investors in Singapore can access a wide variety of unit trusts which invest in different segments of the bond market – government bonds, investment grade corporate bonds, high yield bonds, etc.
Investors can buy into unit trusts for as little as SGD 1,000 as a lump sum or SGD 100 a month under a regular savings plan. These funds often hold portfolios of 40-50 stocks or bonds, thus reducing the risks associated with any of those securities.
Retail Bonds traded on the Singapore Exchange (SGX)
These can be bought and sold in ‘board lots’ (minimum trade sizes) of 1,000 units. There are about a dozen such bonds which are traded on the SGX. Buy/Sell prices are publicly available on the SGX website.
Custody and Post-Sale Services by the Bank
Where the bonds/debentures are held by DBS Bank Ltd (or its nominee) on behalf of the investor, the bank will provide custody services in respect of such holdings in accordance with the terms and services governing the custodian account.
Should a credit event occur, the Bank will take reasonable steps to forward to the investor any notice or other communication receive in respect of such bonds/debentures. As the Bank may not be privy to debt restructuring plans and/or other negotiations between the issuer and its creditors (due to the confidential nature of such discussions), the availability and flow of information may be greatly diminished in such circumstances.
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