Singapore Government Securities (SGS) are marketable debt instruments of the Government of Singapore. Investing in SGS can be an attractive option for those who are looking for a safe and stable investment.
Why invest in SGS?
Since the Singaporean government has a strong credit rating and a history of responsible fiscal management, it makes SGS a reliable choice for risk-averse investors.
- Stability: SGS are considered to be a safe and stable investment, as they are backed by the full faith and credit of the Singaporean government. This means that investors can be confident in the security of their investments.
- Attractive Yields: SGS offer competitive yields compared to other fixed-income investments. The yields on SGS are generally higher than those offered by savings accounts and other bank deposits.
- Diversification: SGS can be a useful addition to a diversified investment portfolio. They can provide a reliable source of income and help to balance out riskier investments.
What are the types of SGS?
SGS are issued in a variety of maturities, ranging from as short as 1 month to as long as 30 years. They are denominated in Singapore dollars and are issued through a competitive bidding process that is open to banks, financial institutions, and individuals.
These debt instruments take two forms
- Treasury bills (T-bills) or
- Singapore Government Securities (SGS) Bonds
The terms of issuance are governed by the Local Treasury Bills Act and the Government Securities Act respectively.
T-bills
T-bills are short-term debt securities that mature in one year or less from their issue date. They are bought and sold at a discount, i.e. at a price less than their face (par) value.
When they mature, the Government will pay the holder an amount of S$ equivalent to the face value of the security. Therefore, the interest earned on the T-bill is the difference between its purchase price and face (par) value.
They are denominated at nominal values of S$1,000 and traded at a rate of discount basis. The Singapore Government typically issues T-bills with 6-month and 1-year maturities.
SGS bonds
SGS bonds are longer-term debt securities ranging from 2 to 50 years, It pays a fixed rate of interest (called the coupon) every six months for the life of the securities and then their face (par) values upon redemption on maturity.
They are generally not issued at a discount unlike T-bills and have typical maturities of 2, 5, 10, 15 and 20 years.
The most recently issued SGS bonds in each of these tenors, being the benchmark securities, are more actively traded. Older and more seasoned SGS bonds become off-the-run issues and are less actively traded. SGS bonds are also denominated in nominal values of S$1,000 and traded on a price basis expressed in terms of S$100 principal.
T-bills | Bonds | |
Issuer | Singapore Government | Singapore Government |
Tenor | 6M and 1Y | 2Y, 5Y, 10Y, 15Y, 20Y, 30 or 50 years (7Y non-benchmark) |
Interest Rate | Discount | Fixed Coupon |
Coupon Payments | N/A | Semi-annual (Every 6 months) |
Minimum Denomination | S$1,000 | S$1,000 |
Category of SGS Bonds
There are three categories of SGS bonds
- SGS (Market Development): This type of Singapore Government Security is issued to fund market development initiatives in Singapore. These initiatives may include projects such as infrastructure development, research and development, and other programs aimed at boosting Singapore’s economic growth. SGS (Market Development) is not specifically targeted towards any particular industry or sector.
- SGS (Infrastructure): This type of Singapore Government Security is issued to fund infrastructure projects in Singapore. These projects may include the construction of new transportation systems, buildings, and other public works projects. SGS (Infrastructure) is specifically targeted towards funding infrastructure development.
- Green SGS (Infrastructure): This type of Singapore Government Security is similar to SGS (Infrastructure), but the funds raised through the sale of these securities are specifically earmarked for financing environmentally-friendly infrastructure projects. These projects may include the construction of renewable energy systems, waste management facilities, and other sustainable infrastructure projects.
In summary, SGS (Market Development) and SGS (Infrastructure) are both issued to fund development projects in Singapore, but SGS (Infrastructure) is specifically targeted towards infrastructure development. Green SGS (Infrastructure) is a type of SGS (Infrastructure) that is focused on financing environmentally-friendly infrastructure projects.
How to invest in SGS?
The Singapore Government is obliged to pay the holders of SGS a fixed sum of money on the maturity date of the securities. As the fiscal agent of the Government, the Monetary Authority of Singapore (MAS) acts to undertake the issue and management of SGS on its behalf.
You can buy SGS bonds and T-bills using cash, Supplementary Retirement Scheme (SRS) funds or CPF Investment Scheme (CPFIS) funds.
Primary Auctions
You can buy new SGS issues at primary auctions through local banks DBS/POSB, OCBC and UOB.
- Cash application: apply at ATMs or Internet banking portal.
- SRS application: apply through the Internet banking portal of your SRS Operator.
- CPFIS-OA application: submit an application via your CPFIS-OA agent banks.
- CPFIS-SA application: submit an application via your CPFIS bond dealers.
Secondary Market
You can choose to hold SGS to maturity or sell them on the secondary market. SGS can be sold on the Singapore Exchange (SGX) or through a government-approved securities dealer.
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Simple to invest, not easy to choose
In today’s market environment, Singapore Government Securities are definitely something worth your attention.
SGS have a solid reputation because they’re backed by the Singapore government, which has a history of being responsible with money.
The Monetary Authority of Singapore (MAS) holds regular auctions, so you can buy SGS directly from the government. You can also trade SGS in the secondary market.
Bond investment is something looks easy on the surface but is complicated inside. Although credit risk is not much of a concern for SGS, you’ve got to familiarise yourself with interest rate implications, duration, market liquidity etc.
If you’re considering adding SGS to your portfolio, you should do some research or talk to a qualified financial advisor.
If you want to find out whether SGS is the right fit for your financial goals and investment portfolio. You can apply for a non-obligatory investment discovery meeting using the form below.