NZ16100X SGS Bond

[mmchaisi]

Today’s MAS announcement in ST.
It says Individual investors may submit auction application for the following 5 year SGS bond.

Why is it 5 year? Tenor is 20 years with remaining approx 20 years. And the maturity date is 1 Aug 2036.

 

[BBCWatcher]

It’s not the 5 year bond this month. If it says that, then there’s a typo.

There’s a 7 year (closer to 8 years, actually) bond coming to auction next month (July, 2018).

 

[mmchaisi]

today’s straits times

http://imgur.com/MsTbzXy

 

[a4973]

It’s not the 5 year bond this month. If it says that, then there’s a typo.

There’s a 7 year (closer to 8 years, actually) bond coming to auction next month (July, 2018).

Hi BBCWatcher
i've been following your posts mostly about CPF matters especially the Shield SA from RA just before 55.
would you be able to advise how to select the appropriate SGS to buy for a person that will turn 55 in Dec 2019?
thanks

 

[BBCWatcher]

today’s straits times
http://imgur.com/MsTbzXy

Wow, that's embarrassing. The Monetary Authority of Singapore ought to do a better job proofreading its bond announcements. The official (non-newspaper) announcement is here.

By the way, it's a little strange MAS says "approximately 20 years" instead of simply "18 years," which is the truth of this reopened bond. Maybe that's because MAS tends to lump its bonds into tenor "buckets" for reporting purposes, so I suppose 18 rounds up to 20 for their reports.

 

[BBCWatcher]

would you be able to advise how to select the appropriate SGS to buy for a person that will turn 55 in Dec 2019?

If you want to buy an individual bond or bill, then the T-Bill that'll be auctioned in January, 2019, would be a good fit. Of course you wouldn't buy it at auction, but you'd buy it strictly before your 55th birthday, preferably on December 1 (if that's a weekday and far enough in advance of your birthday), via the CPF Investment Scheme (SA), from whichever of the three primary dealers (DBS, UOB, OCBC) offers you the best price on that particular t-bill. I don't see any outstanding government bonds that would work as well, so that'll be the one.

Another choice, if you're willing to tolerate a slight amount of principal risk, is to use the Nikko AM Shenton Short Term Bond Fund (S$). You should buy that using a zero cost method -- I think Fundsupermart and POEMS are two such examples -- and also calculate any other costs/fees for quick redemption. It's helpful if your birthday falls right around the middle of the month -- December 15th or thereabouts -- since then you should be able to execute this maneuver with that particular fund within the same calendar month. I wouldn't cut it too close, though, especially on the purchase side.

You won't be able to shield S$40,000 of SA funds, please note. That's the required minimum. The CPF Investment Scheme (SA) is only for SA funds above S$40,000.

 

[a4973]

If you want to buy an individual bond or bill, then the T-Bill that'll be auctioned in January, 2019, would be a good fit. Of course you wouldn't buy it at auction, but you'd buy it strictly before your 55th birthday, preferably on December 1 (if that's a weekday and far enough in advance of your birthday), via the CPF Investment Scheme (SA), from whichever of the three primary dealers (DBS, UOB, OCBC) offers you the best price on that particular t-bill. I don't see any outstanding government bonds that would work as well, so that'll be the one.

Another choice, if you're willing to tolerate a slight amount of principal risk, is to use the Nikko AM Shenton Short Term Bond Fund (S$). You should buy that using a zero cost method -- I think Fundsupermart and POEMS are two such examples -- and also calculate any other costs/fees for quick redemption. It's helpful if your birthday falls right around the middle of the month -- December 15th or thereabouts -- since then you should be able to execute this maneuver with that particular fund within the same calendar month. I wouldn't cut it too close, though, especially on the purchase side.

You won't be able to shield S$40,000 of SA funds, please note. That's the required minimum. The CPF Investment Scheme (SA) is only for SA funds above S$40,000.

Thanks BBC, if I would prefer no principal risk then the Jan 19 Tbill would be the better option?

Sent from Motorola NEXUS 6 using GAGT

 

[BBCWatcher]

Thanks BBC, if I would prefer no principal risk then the Jan 19 Tbill would be the better option?

Yes, but I would compare both methods and might use both methods. One problem with the t-bill approach is that t-bills are only available in $1,000 face value increments, so you're going to have a rounding error and won't be able to shield the last $XXX of Special Account funds above $40,000. Another problem is that you'll probably have "fun" for hours talking with lots of bank employees who won't understand what you're trying to do. This'll be a complex transaction for them. Yet another problem is that you're going to lose 3 months of SA interest with the t-bill approach, maybe 4 if your 55th birthday falls early in the month. You'll lose at least December (and possibly November), January, and (most likely) February since the maturing t-bill proceeds won't actually land back in your Special Account until February. With the Nikko approach you'd only lose 1 month of interest (or possibly 2 if your birthday is "too close" to the beginning or end of the calendar month).

The principal risk associated with that Nikko fund is not much. The fund price will fall a bit if the market interest rates on government bonds rise while you're holding the fund, so that's the risk. (And you'll probably only be holding the fund for about two weeks, maybe less.) I suppose you could look back in that fund's history to find its worst two weeks ever and see how much its share price fell back then, in order to get an idea what the absolute worst case would be.

Anyway, I present both options, and they both have their pros and cons.

 

[a4973]

Yes, but I would compare both methods and might use both methods. One problem with the t-bill approach is that t-bills are only available in $1,000 face value increments, so you're going to have a rounding error and won't be able to shield the last $XXX of Special Account funds above $40,000. Another problem is that you'll probably have "fun" for hours talking with lots of bank employees who won't understand what you're trying to do. This'll be a complex transaction for them. Yet another problem is that you're going to lose 3 months of SA interest with the t-bill approach, maybe 4 if your 55th birthday falls early in the month. You'll lose at least December (and possibly November), January, and (most likely) February since the maturing t-bill proceeds won't actually land back in your Special Account until February. With the Nikko approach you'd only lose 1 month of interest (or possibly 2 if your birthday is "too close" to the beginning or end of the calendar month).

The principal risk associated with that Nikko fund is not much. The fund price will fall a bit if the market interest rates on government bonds rise while you're holding the fund, so that's the risk. (And you'll probably only be holding the fund for about two weeks, maybe less.) I suppose you could look back in that fund's history to find its worst two weeks ever and see how much its share price fell back then, in order to get an idea what the absolute worst case would be.

Anyway, I present both options, and they both have their pros and cons.

Thanks for the very detailed explanation and guidance. In broad strokes I believe I'm clear about both options. I'll continue lurking around and revisit this in 3Q19 to see if any changes have surface.

Sent from Motorola NEXUS 6 using GAGT

 

[jackieatbtu]

I know it has been discussed previously as a way to shield SA money before age 55. But has anybody confirm that this technique will work?

If you want to buy an individual bond or bill, then the T-Bill that'll be auctioned in January, 2019, would be a good fit. Of course you wouldn't buy it at auction, but you'd buy it strictly before your 55th birthday, preferably on December 1 (if that's a weekday and far enough in advance of your birthday), via the CPF Investment Scheme (SA), from whichever of the three primary dealers (DBS, UOB, OCBC) offers you the best price on that particular t-bill. I don't see any outstanding government bonds that would work as well, so that'll be the one.

Another choice, if you're willing to tolerate a slight amount of principal risk, is to use the Nikko AM Shenton Short Term Bond Fund (S$). You should buy that using a zero cost method -- I think Fundsupermart and POEMS are two such examples -- and also calculate any other costs/fees for quick redemption. It's helpful if your birthday falls right around the middle of the month -- December 15th or thereabouts -- since then you should be able to execute this maneuver with that particular fund within the same calendar month. I wouldn't cut it too close, though, especially on the purchase side.

You won't be able to shield S$40,000 of SA funds, please note. That's the required minimum. The CPF Investment Scheme (SA) is only for SA funds above S$40,000.

 

[BBCWatcher]

We’ve seen one second hand report of success, using a unit trust (the Nikko AM one evidently).

Please note that you can “double hack” this one if you wish, and it works like this:

(a) Just before (strictly before) your 55th birthday, shield all but $40K of your Special Account using either/both the t-bill or Nikko AM bond index fund;

(b) On your 55th birthday, or at least before your t-bill matures (if you’re using a t-bill), withdraw some OA funds;

(c) Let your t-bill mature and/or close out your Nikko bond position, to return the funds to your Special Account.

In other words, you can shield SA from the normal withdrawal priority order, too, at the same time. I don’t necessarily recommend a withdrawal at age 55, but if you need those OA funds at that point in time, you can perform both “hacks” as part of the same SA shield.

 

[5408854088]

Results are out:

Cut-off Yield
2.86% p.a.

Cut-off Price
92.372%

 

[JuniorLion]

We’ve seen one second hand report of success, using a unit trust (the Nikko AM one evidently).

Please note that you can “double hack” this one if you wish, and it works like this:

(a) Just before (strictly before) your 55th birthday, shield all but $40K of your Special Account using either/both the t-bill or Nikko AM bond index fund;

(b) On your 55th birthday, or at least before your t-bill matures (if you’re using a t-bill), withdraw some OA funds;

(c) Let your t-bill mature and/or close out your Nikko bond position, to return the funds to your Special Account.

In other words, you can shield SA from the normal withdrawal priority order, too, at the same time. I don’t necessarily recommend a withdrawal at age 55, but if you need those OA funds at that point in time, you can perform both “hacks” as part of the same SA shield.

As discussed before, one can also theoretically (subject to changes) shield all his OA and SA from being automatically transferred to his RA upon reaching 55.

 

[tangent314]

You don't want to be shielding your SA using this bond.

 

[a4973]

You don't want to be shielding your SA using this bond.

May I ask why? Thanks

Sent from Motorola NEXUS 6 using GAGT

 

[tangent314]

May I ask why? Thanks

When you shield your SA you want something that can be bought just before you hit 55 and then redeemed just after hitting 55. A bond with 18 years to maturity doesn't fit this requirements.

 

[JuniorLion]

When you shield your SA you want something that can be bought just before you hit 55 and then redeemed just after hitting 55. A bond with 18 years to maturity doesn't fit this requirements.

Then:
1) buy a tbill that is about to mature; or
2) sell this bond on the market after 55

 

[BBCWatcher]

Then:
1) buy a tbill that is about to mature; or
2) sell this bond on the market after 55

While option #2 is possible, it’s much better to know the whole picture for this maneuver, with certainty (to a AAA rated government promised certainty), right up front. That way you know whether this maneuver makes financial sense, and how much sense.

Moreover, a bond fund is highly likely going to be better than option #2. That is, if you’re going to accept a bit of backend uncertainty, it’s better then to minimize the duration of that uncertainty. Using the lowest cost/least volatile Singapore dollar bond fund you can find (that’s available through the CPF Investment Scheme-SA and also available through a zero sales charge platform like Fundsupermart, POEMS, or DollarDex), you can reduce the duration of this full shielding manuever to as little as one month of Special Account interest loss and ~10 calendar days of fund holding. I personally wouldn’t cut it quite that close, but if you execute well that sort of quickness is possible.

 

[a4973]

Yes, but I would compare both methods and might use both methods. One problem with the t-bill approach is that t-bills are only available in $1,000 face value increments, so you're going to have a rounding error and won't be able to shield the last $XXX of Special Account funds above $40,000. Another problem is that you'll probably have "fun" for hours talking with lots of bank employees who won't understand what you're trying to do. This'll be a complex transaction for them. Yet another problem is that you're going to lose 3 months of SA interest with the t-bill approach, maybe 4 if your 55th birthday falls early in the month. You'll lose at least December (and possibly November), January, and (most likely) February since the maturing t-bill proceeds won't actually land back in your Special Account until February. With the Nikko approach you'd only lose 1 month of interest (or possibly 2 if your birthday is "too close" to the beginning or end of the calendar month).

The principal risk associated with that Nikko fund is not much. The fund price will fall a bit if the market interest rates on government bonds rise while you're holding the fund, so that's the risk. (And you'll probably only be holding the fund for about two weeks, maybe less.) I suppose you could look back in that fund's history to find its worst two weeks ever and see how much its share price fell back then, in order to get an idea what the absolute worst case would be.

Anyway, I present both options, and they both have their pros and cons.

Hi BBC
i have done groundwork by making sure that the POSB branch convenient for me have staff that are aware of the buying TBill with CPF SA process. so between the TBill & Nikko fund options , the option with the least manoeuvring & moving parts should be the TBill? ie just go to the bank, fill up forms to buy then when it matures inJanuary, 2019 the returns just get credited back to my CPF SA? or my DBS investment account?

 

[BBCWatcher]

so between the TBill & Nikko fund options , the option with the least manoeuvring & moving parts should be the TBill? ie just go to the bank, fill up forms to buy then when it matures inJanuary, 2019 the returns just get credited back to my CPF SA? or my DBS investment account?

Yes, that's correct. If your bank employee friend has found the right form, if they have a t-bill maturing soonest after your 55th birthday that you want to buy at the price they're offering (they won't be able to tell you the exact price until the day you buy it), and if you/they fill out the form correctly, that's all great.

The key thing to confirm is whether and when your CPF Special Account funds are deducted, so watch your CPF online account closely for that. If that actually happens, then you should be all set and have nothing more to do. If it doesn't happen, I'd be prepared to use the fund-based approach as a backup. Which means you don't want to cut this too close.