Understanding Singapore’s Bond Market
About Singapore Government Securities
Singapore Government Securities (SGS) are debt securities issued by the Singapore Government.
SGS are considered safe investments fully backed by the Singapore Government. They are issued and managed by the Monetary Authority of Singapore (MAS) on behalf of the Government.
There are four types of SGS:
Treasury Bills (T-bills) are short-term bills that mature in one year or less from their issue date.
The Government currently offers 6-month and 1-year T-bills. They are issued at a discount to their face value. When the T-bills mature, the Government pays the holder an amount of money equivalent to its face value.
SGS bonds are longer-term bonds which mature in 2, 5, 10, 15, 20 or 30 years.
SGS bond holders receive a fixed coupon every six months before the bond matures and the face value of the bond upon maturity.
There are three categories of SGS Bonds, and they rank pari passu:
- SGS (Market Development), issued under the Government Securities Act, to develop the domestic debt market.
- SGS (Infrastructure), issued under the Significant Infrastructure Government Loan Act (SINGA), to finance major, long-term infrastructure.
- Green SGS (Infrastructure), issued under the SINGA, to finance major, long-term green infrastructure projects.
Singapore Savings Bonds (SSBs) are non-marketable SGS only available to retail investors.
They have a 10-year tenor but can be redeemed (in part or fully) by investors before maturity. The interest rate for SSBs increases the longer they are held. When the bond matures, investors will receive the outstanding amount of SSBs that they hold.
Cash Management Treasury Bills (CMTBs) are short-term bills that mature in less than 6 months.
Unlike T-bills, CMTBs are only available to institutional investors. CMTBs serve as an instrument within the Government’s cash management toolkit, enhancing the Government’s ability to manage any short-term cashflow mismatches. CMTBs are issued on an ad-hoc basis, and can be tailored to any tenor under 6 months. They are issued at a discount to their face value.
When the CMTBs mature, the Government pays the holder an amount of money equivalent to its face value.
Background and History
The Singapore Government operates a balanced budget policy and often enjoys budget surpluses. Most of the Government’s borrowings are not used to fund its expenditure.
The Government issues SGS bonds and T-bills primarily to:
- Build a liquid SGS market to provide a robust government yield curve, which serves as a benchmark for the corporate debt market.
- Grow an active secondary market, both for cash transactions and derivatives, to enable efficient risk management.
- Encourage issuers and investors, both domestic and international, to participate in the Singapore bond market.
SGS were initially issued to meet banks' needs for a risk-free asset in their liquid asset portfolios.
In 1998, MAS spearheaded efforts to enhance the efficiency and liquidity of the SGS market as part of its strategy to develop Singapore as an international debt hub. This was further refined in May 2000 with the introduction of a focused SGS issuance programme aimed at building large and liquid benchmark bonds. This is done through larger issuance of new SGS bonds and re-openings of existing issues to enlarge the free float.
In 2015, the SSB programme was introduced to provide individuals with a long-term savings option that offers safe returns.
In 2021, the Government announced plans to issue CMTBs. CMTBs are issued on an ad-hoc basis, and serve as one of the instruments within the Government’s cash management toolkit. CMTBs provide the Government with more operational flexibility to raise cash quickly, should any short-term cash flow mismatches occur.
In 2021, Parliament passed the (SINGA) authorising the Government to borrow up to S$90 billion to finance major, long-term infrastructure. This is a fair and efficient approach – fair, because payments are borne by the generations who will benefit from the infrastructure; and efficient, because the Government can tap the debt market at favourable interest rates given Singapore’s triple A credit rating. SGS (Infrastructure) and Green SGS (Infrastructure) would be issued under the SINGA.
Government Securities Fund
The Government Securities Fund holds all proceeds from the issuance of all SGS bonds and T-bills, except for SGS (Infrastructure) and Green SGS (Infrastructure). This ensures that the Government’s borrowings (except for those under SGS (Infrastructure) and Green SGS (Infrastructure)) are not used to fund its expenditure.
The Government Securities Fund can only be used to pay the interest and principal sums of SGS (excluding SGS (Infrastructure) and Green SGS (Infrastructure)).
Market Depth and Breadth
Over the years, the amount of outstanding SGS has grown steadily from S$43.2 billion in 2000 to S$196.3 billion in 2020.
SGS bonds are also included within major bond indices including:
- Citi Global Government Bond Index
- JP Morgan Government Bond Index
- Markit iBoxx Asian Local Bond Index
SGS Annual Issuance Calendar
SGS bonds and T-bills are issued according to an issuance calendar, published around October/November each year for the following year. The issuance calendar provides the issuance date and SGS to be issued at each auction. The amount offered will be published closer to the issuance date.
In designing the calendar, MAS takes into account:
- Market conditions.
- The need to concentrate liquidity in benchmark bonds.
- Feedback from primary dealers.
SSBs are issued monthly. The maximum issuance size of each SSB is announced on the first business day of each month. Issuance takes place on the first business day of the following month.
Authority to Issue SGS
The amount of SGS (Infrastructure) and Green SGS (Infrastructure) issued is capped at S$90 billion under the SINGA, while the amount of SGS (Market Development) and SSBs issued is authorised by a resolution of Parliament and with the President's concurrence. Each year, MAS seeks approval from the Minister for Finance for the total SGS issuance amount for the new financial year. MAS decides, in consultation with the SGS primary dealers, the timing and amount of individual bond issues.