Singapore Treasury bills (T-bills)

[stephenbishop]

@stephenbishop are you able to share more about how SGS Bonds works in terms of competitive / non competitive bid?

@hyperfuse

In many ways similar to SGS t-bills but with some important differences.

The main differences, for both competitive and non-competitive bids, are as follows to the best of my recollection:

1. Can make as many bids as you wish but the aggregate of all bids maximum per individual is SGD 2 million per auction.
2. For reopened SGS bonds only, the amount deducted from your account at the point of bidding is 115% of the amount you want to invest. If you are successful, you will be refunded the following amount generally on the same day the auction closes: 115% - cut-off price - accrued interest from last interest payment date to date of issuance of the reopened bond. For original issue bonds, the amount deducted from your account at the point of bidding will be the amount you intend to invest.
3. Interest will be the nominal bond coupon and will be paid on the interest payment date(s).
4. The nominal value (i.e. the face value) of the SGS bond will be redeemed on maturity of the bond.

The above are the main differences I recall compared with SGS t-bills. The other requirements I think are similar to SGS t-bills - at least to the best of my recollection.

Hope this helps but I would advice that any potential investor refer to the official source on the full requirements (https://www.mas.gov.sg/bonds-and-bills/Singapore-Government-Bonds-Information-for-Individuals).

 

[reddevil0728]

In many ways similar to SGS t-bills but with some important differences.

The main differences, for both competitive and non-competitive bids, are as follows to the best of my recollection:

1. Can make as many bids as you wish but the aggregate of all bids maximum per individual is SGD 2 million per auction.
2. For reopened SGS bonds only, the amount deducted from your account at the point of bidding is 115% of the amount you want to invest. If you are successful, you will be refunded the following amount generally on the same day the auction closes: 115% - cut-off price - accrued interest from last interest payment date to date of issuance of the reopened bond. For original issue bonds, the amount deducted from your account at the point of bidding will be the amount you intend to invest.
3. Interest will be the nominal bond coupon and will be paid on the interest payment date(s).
4. The nominal value (i.e. the face value) of the SGS bond will be redeemed on maturity of the bond.

The above are the main differences I recall compared with SGS t-bills. The other requirements I think are similar to SGS t-bills - at least to the best of my recollection.

Hope this helps but I would advice that any potential investor refer to the official source on the full requirements (https://www.mas.gov.sg/bonds-and-bills/Singapore-Government-Bonds-Information-for-Individuals).

A few clarifications:

Understand what you described to be reopened bonds where you need to put in 115% of the amount you wish to purchase. Reason being the traded price of that bond might be more than the face value? hence you might actually need to pay more for it.

Thus you put in 115% and then you just get back the diff as the cut-off price might be higher than face value?

How does the competitive and non competitive bid works in SGS bonds case? since unlike T-bill where the yield is determined by bidding, there is nominal bond coupon for SGS Bonds.

 

[stephenbishop]

Understand what you described to be reopened bonds where you need to put in 115% of the amount you wish to purchase. Reason being the traded price of that bond might be more than the face value? hence you might actually need to pay more for it.

Thus you put in 115% and then you just get back the diff as the cut-off price might be higher than face value?

I think for two reasons. One, as you said, because the cut-off price may be higher than face value and two, because of the accrued interest from last interest payment date to date of issuance. This is my reasoning and I maybe wrong -I don't think there is an official reason provided to require the 15% buffer for reopened bonds.

How does the competitive and non competitive bid works in SGS bonds case? since unlike T-bill where the yield is determined by bidding, there is nominal bond coupon for SGS Bonds.

Exactly the same as SGS T-bill. You bid the cut-off yield for competitive bids.The coupon is not relevant in the bidding process. The cut-off yield determines the cut-off price.

 

[reddevil0728]

I think for two reasons. One, as you said, because the cut-off price may be higher than face value and two, because of the accrued interest from last interest payment date to date of issuance. This is my reasoning and I maybe wrong -I don't think there is an official reason provided to require the 15% buffer for reopened bonds.


Exactly the same as SGS T-bill. You bid the cut-off yield for competitive bids.The coupon is not relevant in the bidding process. The cut-off yield determines the cut-off price.

So you will get the bond at a discount off face value + coupon rate?

 

[anddrool]

AFAIK FSM doesn't buy SGS bonds, they only sell them. No idea what dealer banks offer for SGS bonds, maybe somebody can call them up to ask. I generally hold very short duration bills and bonds to maturity, nothing above 2 year so the illiquidity does not affect me.

Yes. I understand that FSM does not buy SGS bond. I'm wondering is the bank buying price comparable to FSM and are they buying at market price or how much is the difference in price.

Moving forward the longer tenure (5,10,20,30 years) bonds might have a good rate. Which might be worth considering buying. Hence there is a need to understand how to sell them when there is need to.

In terms of liquidity, FSM is definitely better. However there are fees involves. Is it worth getting SGS through MAS auction(to maximum yield) or through FSM for longer term tenure.

 

[anddrool]

SGS Bonds competitive / non competitive bid

For non competitive bid
- 40% is allocated to non competitive bid
- will get at cut-off yield price (which is the best price in the auction)
- have to accept whatever the cut-off yield price. have to accept risk that cut-off yield price might be high and is not what you want.

For competitive bid
- Get the indicate what yield you want to buy. if does not meet desired yield, you don't get it.
- However you need to have good knowledge to determine the desired yield. You don't to enter too low( lousy return) or too high(unable to get).

 

[stephenbishop]

So you will get the bond at a discount off face value + coupon rate?

No for discount off face value unless cut off price is less than face value. Yes for coupon rate.

 

[maumu]

We'll be able to see the T-bills we bought in our CDP account today right? For those who bought last week. First time for me.

Today is issuance date.

 

[lzydata]

We'll be able to see the T-bills we bought in our CDP account today right? For those who bought last week. First time for me.

Today is issuance date.

Yes but CDP usually takes 1 more day to update so you might get the notification / see it in the account only tomorrow.

 

[stephenbishop]

Thus you put in 115% and then you just get back the diff as the cut-off price might be higher than face value?

Sorry I missed directly answering this question . You put in 115% and you get refunded on the same day the auction closes 115% - cut-off price (A) - accrued interest from last interest payment date to date of issuance of the reopened bond (B). The amount in (B) is effectively refunded to you at the first interest payment date after re-issuance as you receive the full amount of the coupon (not prorated to the time since your acquisition).

So effectively you end up getting refunded 115% - cut-off price (mostly on the same date as the auction closes and the accrued interest portion (B) on the date of the first coupon payment after re-issuance).

 

[vsvs24]

In terms of liquidity, FSM is definitely better. However there are fees involves. Is it worth getting SGS through MAS auction(to maximum yield) or through FSM for longer term tenure.

If buy from bank, the bonds are held in CDP. If buy from FSM, FSM hold it as custodian ?

 

[stephenbishop]

NY09100H 2-Year Bond
Cut off yield 2.7% (https://www.mas.gov.sg/bonds-and-bi...nds?issue_code=NY09100H&issue_date=2022-07-01)

 

[stephenbishop]

You put competitive or non-competitive bid?

I applied for the non-competitive tranche. Barely made it (% of Competitive Applications at Cut-off Allotted = Approximately 38%)!

 

[lzydata]

NY09100H 2-Year Bond
Cut off yield 2.7% (https://www.mas.gov.sg/bonds-and-bi...nds?issue_code=NY09100H&issue_date=2022-07-01)

Again a much higher auction result than the prevailing market yield.

 

[stephenbishop]

Again a much higher auction result than the prevailing market yield.

Actually a bit lower than yesterday's closing yield of 2.72%. But interestingly, huge amount of non-competitive bids - highest I have seen for a while. I hope many are retail investors abandoning ridiculously low FD rates offered by the primary dealers.

 

[lzydata]

Actually a bit lower than yesterday's closing yield of 2.72%. But interestingly, huge amount of non-competitive bids - highest I have seen for a while. I hope many are retail investors abandoning ridiculously low FD rates offered by the primary dealers.

Oh I think you mean the one quoted for that specific bond on that page. I meant the benchmark 2 year yield, 2.49% pa. But yes, the reopened bond is 2 years and 2 months technically.

 

[stephenbishop]

Oh I think you mean the one quoted for that specific bond on that page. I meant the benchmark 2 year yield, 2.49% pa. But yes, the reopened bond is 2 years and 2 months technically.

You are correct as well!

 

[reddevil0728]

Yes. I understand that FSM does not buy SGS bond. I'm wondering is the bank buying price comparable to FSM and are they buying at market price or how much is the difference in price.

Moving forward the longer tenure (5,10,20,30 years) bonds might have a good rate. Which might be worth considering buying. Hence there is a need to understand how to sell them when there is need to.

In terms of liquidity, FSM is definitely better. However there are fees involves. Is it worth getting SGS through MAS auction(to maximum yield) or through FSM for longer term tenure.

Actually when talking about FSM is talking about secondary market right? That means other brokers even bank brokers can also buy/sell from there also no?

 

[reddevil0728]

We'll be able to see the T-bills we bought in our CDP account today right? For those who bought last week. First time for me.

Today is issuance date.

Yes but CDP usually takes 1 more day to update so you might get the notification / see it in the account only tomorrow.

Actually usually around 5pm in issuance day

 

[reddevil0728]

If buy from bank, the bonds are held in CDP. If buy from FSM, FSM hold it as custodian ?

That should be the case. No diff from other stocks.