Should you buy Temasek’s 2023 Bonds?

It seems like the Singapore bond market has been pretty interesting in 2018! We saw the launch of Singapore’s first private equity bonds from Astrea earlier in the year and now we have Temasek launching more bonds to retail investors – spicing up the market with more offerings.

While you baulk at the low yield of 2.7% with a 5 year maturity, it does offer a slightly higher yield (~0.5%) compared to the current SSB when held for 5 years. The trade off though, is lower liquidity and premature selling of this bond might lead to monetary losses. The SSB on the other hand, has capital guaranteed and almost instant liquidity – this makes the SSB better for ’emergency funds’.

Tell me more about them!

The T2023 bonds from Temasek pays a fixed interest rate of 2.7% per year, payable every six months. The bond is for five years, maturing in October 2023 and on maturity, the principal will be returned. In the public offer, you may subscribe in multiples of $1000. It is rated¬†Aaa by Moody’s and AAA by S&P.

What I think about them

I like the fact that Temasek is opening up the local bond market to more retail investors. In the past, local bonds were very inaccessible as they required at high minimum sum to invest. Today, the story looks more promising.

Comparing to the SSBs, which I absolutely love, these T2023 bonds are less liquid, i.e. I recommend you to buy them only if you don’t need the money for 5 years. They can be difficult to sell on the secondary market, and you might sell it for a lower price than what you’d paid for from duration and interest rate risk. Nonetheless, if you really need the capital you can at least get it back.

Comparing to high yield savings accounts, if you meet certain criteria, you may get a savings yield of close to the T2023 bonds, especially if you use UOB or BOC. This might reduce the appeal of the T2023 bonds because the risk reward ratio may not make sense.

Overall, I like the option of applying for them – I think certain kinds of investors might find this issuance useful. For example, those who have TONS of ideal cash to deploy where savings accounts have capped maximums might this another avenue to deploy capital. The second category of people are people who absolutely don’t need the cash and are certain that 5 years of ‘lock-in’ at a 2.70% interest is alright for them. Unfortunately, I don’t belong in either.

How do I apply for them?

If you’re keen on applying, applications are open till 23rd October 12pm and you may apply them via Internet banking or ATMs. You need to have a local bank account and CDP account as the bonds will be stored in the CDP account.

Derrick is a digital native, finance geek and avid photographer. He loves spontaneity but is a control freak at the same time.

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