The Monetary Authority of Singapore (MAS) has announced the launch of the Singapore Savings Bonds (SSB). With the bonds MAS said it aims to provide individual investors with a long-term savings option that offer safe returns to help them meet their long-term financial goals and retirement needs.

“The possible impact of SSBs on structured products or deposits will be its liquidity,” a senior source at a local bank said. The bonds can be redeemed monthly with no penalty, and may be attractive to investors who don’t want to see their capital locked up for a longer period, as is usual the case with structured products, the source said.

“However, the outlook for structured products is positive for two reasons. Firstly, the bonds are pretty new and investors have not got into it yet. Secondly, the level of the interest rate is relatively low although it will step-up annually, while structured products offer better coupons, hence the target market will be different.”

According to MAS, SSBs will allow investors to earn interest that is linked to long-term Singapore Government Securities (SGS) rates, in which the coupons will increase over time to 2%-3% if the bond is held to maturity (10 years).

Regarding whether the “risk-free” nature of the bonds will attract more investors from structured products, the source was positive on the outlook.

“Structured products in the Singapore retail market are offered by the big banks and therefore there should not be much worry on the problem of default,” he added.

According to the SRP database, the providers of structured products in Singapore include Standard Chartered, United Overseas Bank, OCBC bank, CIMB, DBS Bank and HSBC Bank. The coupon payment of a typical product can be up to around 12%.

SSBs are only available to individual investors with a minimum investment amount of $500, and subsequent multiples of $500 up to a cap to be announced. They will be launched in the second half of 2015.

Related Stories:
Credit Suisse launches global digital PB app in Singapore
Singapore trade bodies launch e-learning portal for unlisted investments