Please read the disclaimer at the bottom of my blog if you wish to continue with the contents below.
The first tranche of the Singapore Saving Bond is biddable now and its average 10 years yield is 2.63%. We have to weigh the pros and cons before we rush to bid for this almost risk free bond backed by the Singapore Government.
First, one must know that the gradual annual yield step up mechanism effects compounding negatively. Why? Because you are getting the bulk of the yield after the 5th year. Secondly, you need a one month notice before you can sell out at par which means although liquidity is always available, it is slow liquidity.
Lets compare it with the original SGS bond that is currently trading on the exchange:
The benefit is that you are buying the exact same tenor bond backed by the government but at a slightly better yield. Another benefit is that you can exit anytime you want as it is listed and the yield is consistent yoy which makes for a better compounding instrument. Not forgetting you will also get the capital gain on the date of maturity(from purchase price of 96.12 to call back price of par on maturity).
If you are slightly less risk averse, you can consider retail listed bonds like Capmall Trust 3.08%(code TY6Z) maturing in six years time and Fraser Centre Point 3.65%(AXXZ) seven years bond. Both having higher yields than the government bond, with shorter tenor and trading below or very close to par now.