Singapore SGS Bond

[brianlee_sg]

Didn’t buy a lot but at least Get to lock in the interest rate higher than OA for the next 10 years.

 

[maumu]

Didn’t buy a lot but at least Get to lock in the interest rate higher than OA for the next 10 years.

marginally higher...

if CPF decides to increase OA rates it'll be worse off actually

I also have a batch bought in 2018 with the same rate (2.625%)... maturing only in 2028

 

[vsvs24]

You will be paid coupon rate. I believe the rest will be refunded as lzydata has explained to us.

I bid competitive higher than cutoff yield so will be refunded.

But trying to understand how new issue SGS works.

So interest half yearly based on coupon rate 2.625% for next 10 years

If get $10,000 how much will be refunded ? $74 ?

 

[a4973]

2.625%

if you get it the difference will be refunded to you.

so for a competitive bid of 2.68% means unsuccessful and full refund? thanks

 

[reddevil0728]

so for a competitive bid of 2.68% means unsuccessful and full refund? thanks

Successful.

cut off yield that matters.

 

[jayou8]

I bid competitive higher than cutoff yield so will be refunded.

But trying to understand how new issue SGS works.

So interest half yearly based on coupon rate 2.625% for next 10 years

If get $10,000 how much will be refunded ? $74 ?

yes.. the price you should be paying is 99.26 instead of 100

 

[a4973]

Successful.

cut off yield that matters.

so successful allotment is pegged to the cut off yield of 2.71% but the coupon (interest) is 2.625%? again please help me dumb it down a notch so i can understand better. in short what is my return vs OA 2.5% as i have used OA for this auction ? many thanks reddevil0728

 

[lzydata]

so successful allotment is pegged to the cut off yield of 2.71% but the coupon (interest) is 2.625%? again please help me dumb it down a notch so i can understand better. in short what is my return vs OA 2.5% as i have used OA for this auction ? many thanks reddevil0728

You will receive coupons at 2.625, but the price you pay for the bond is 99.26 after getting the refund of 0.74. This is what gives the yield of 2.71% which can be calculated in Excel or bond calculators.

 

[reddevil0728]

so successful allotment is pegged to the cut off yield of 2.71% but the coupon (interest) is 2.625%? again please help me dumb it down a notch so i can understand better. in short what is my return vs OA 2.5% as i have used OA for this auction ? many thanks reddevil0728

Technically 2.71% if you hold it for 10 years.

Just that coupon rate is 2.625% because coupon rate has some rounding.

so u will have 74 bucks refunded to you for every 10k u apply, because the effective yield should have been 2.71%.

So the diff between 2.71% and 2.625% is refunded in cash upfront.

At the end of the 10th year you will get back 10k (assuming that’s how much you apply).

so in cash you will get back

74 bucks upfront in refund.

about 131.25 every 6 months for 10 years

10k at the end of the 10th year when the bond matures.

 

[CaptainWu]

Didn’t buy a lot but at least Get to lock in the interest rate higher than OA for the next 10 years.

I thought to buy with OA but decided not too seeing US Tresures drops a lot recently.

 

[reddevil0728]

I thought to buy with OA but decided not too seeing US Tresures drops a lot recently.

Need to see 10y yield.

 

[lzydata]

Btw I see some people compare this 10 year SGS to CPF OA.

However, there is an important difference - CPF interest is compounded. SGS bond interest is not.

$100 at 2.5% pa compounded after 10 years is $128.

$100 in this SGS bond earning $2.625 coupon annually gives in total $126.25.

 

[CaptainWu]

Btw I see some people compare this 10 year SGS to CPF OA.

However, there is an important difference - CPF interest is compounded. SGS bond interest is not.

$100 at 2.5% pa compounded after 10 years is $128.

$100 in this SGS bond earning $2.625 coupon annually gives in total $126.25.

Right so marignally higher may not be good enough to overtake OA.....

 

[reddevil0728]

Btw I see some people compare this 10 year SGS to CPF OA.

However, there is an important difference - CPF interest is compounded. SGS bond interest is not.

$100 at 2.5% pa compounded after 10 years is $128.

$100 in this SGS bond earning $2.625 coupon annually gives in total $126.25.

That’s why it needs to be higher enough to make sense to use CPF OA.

 

[a4973]

Btw I see some people compare this 10 year SGS to CPF OA.

However, there is an important difference - CPF interest is compounded. SGS bond interest is not.

$100 at 2.5% pa compounded after 10 years is $128.

$100 in this SGS bond earning $2.625 coupon annually gives in total $126.25.

so for OA $100k the math is .....

$100000 at 2.5% pa compounded after 10 years is $128000

$100000 in this SGS bond earning $2.625 coupon annually gives in total $126250

 

[reddevil0728]

so for OA $100k the math is .....

$100000 at 2.5% pa compounded after 10 years is $128000

$100000 in this SGS bond earning $2.625 coupon annually gives in total $126250

But cut off yield is 2.71% for this. So will be slightly higher

 

[a4973]

But cut off yield is 2.71% for this. So will be slightly higher

i see why you say will be slightly higher because have to take into account the refund of $740?

 

[lzydata]

Alright, amending the calculation:

$100 at 2.5% pa compounded after 10 years is $128.

$99.26 in this SGS bond earning $2.625 coupon annually gives in total $126.25. Return is $126.25-$99.26 = $26.99.

It is still lesser.

 

[reddevil0728]

i see why you say will be slightly higher because have to take into account the refund of $740?

Ya.

see my post above. About the money you will get.

 

[a4973]

Ya.

see my post above. About the money you will get.

and because i intend to reinvest the coupons back to CPF via VC3A every 6 months it should narrow the difference between remaining and compounding in OA vs buying this 10 year bond ? thanks again.