December 9, 2023

How do I buy Bonds in Singapore?

Figuring out how to buy bonds in Singapore can be difficult, especially if you’re new to investing. With some guidance and basic knowledge of the market, anyone should be able to figure it out.

What is an index-linked savings bond?

Singapore Pools offer these types of bonds and will pay you a return based on inflation as measured by CPI (Consumer Price Index). The interest rate changes every month and is announced at 8 pm on the 25th day of each month until your bond matures or you sell it.

How do I buy into an index-linked savings bond?

You simply need to go down to any SingPost branch or Singapore Pools branch to buy your bond. Contact the SingPost branch about opening an account beforehand, so you don’t have to wait in line when you get there. Bonds issued by Singapore Pools are usually issued for 30 months. On the day of maturity, you can choose to cash out or roll it over.

Cashing out is selling your bond back to Singapore Pools at face value plus any interest earned before that date. You do not have to pay capital gains tax on this amount, unlike selling it on the stock market.

Selling bonds on the stock market is called secondary trading, and you’ll need a securities trading account with a stockbroker to do it. You’ll also need a lot of money for this sort of trading because you have to pay capital gains tax on the difference between your bond’s price and face value when you cash out. If SingPost or Singapore Pools issues an index-linked savings bond, they will waive the guarantee if interest rates fall below 2%. In that case, they’ll buy back your bond at half its original price plus whatever interest is earned before that date.

How do I start buying bonds in Singapore?

To get started, visit the websites of SingPost and Singapore Pools. Check their past announcements of their respective biannual interest rate changes to predict future interest rates and plan accordingly.

New investors can also take advantage of Singapore Savings Bonds. For instance, companies usually offer their employees the option of purchasing bonds through their payroll. This means that your salary will be automatically deducted each month, and your employer will deposit money into an account where you can purchase savings bonds.

It is also possible to save up enough money beforehand so that you may make a one-off purchase without having to pay commission fees or any other charges against your bond investment. Furthermore, banks will sometimes allow customers to invest in these savings bonds even though they do not meet the minimum balance requirements if you have enough financial resources.

This money is usually returned to the account holders monthly or when they require it. However, your money will not be placed in a savings account until you need it back in some cases. This means that if you do not need the money for several years, you can allow your investment to sit dormant until you decide to take out your purchase. “It is best to build up funds over time,” says one bond expert in Singapore. “Doing this creates more options available to choose from when it comes time to make an actual purchase.”

Cash Cow Bonds are also worth considering if you are interested in bonds but lack financial resources. With Cash Cow Bonds, investors receive their interest regularly once every few months. This money is also tax-free, which means that you can continue to receive your income even after your investment has been repaid.

Final Word

“But most importantly, it is important to remember that the rules are not set in stone,” says another bond expert in Singapore. “If there are certain requirements that are preventing you from purchasing these savings bonds, then it might be time to go over them with a fine-tooth comb.” Everyone deserves access to financial opportunities regardless of their background or social status. Before starting to trade bonds online, it is advisable to use a reputable online broker in Singapore.