Singapore is in need of cash and is raising S$2 billion bond for sale under the Singapore Savings Bonds (SSBs). The Monetary Authority of Singapore (MAS) announced that the bond for sale next year in 2017 will be half that of the S$4 billion in 2016 due to weak demand. As of 2016, only S$987 million of the S$4 billion bond up for sale were sold.
“We have revised the issuance size for 2017, taking into account the subscription amounts in 2016.”
Due to very weak demand, the Singapore government market SSBs as “low-entry”, “risk-free” and “tax-exempted”. There isn’t even a penalty charge for early withdrawal of the 10-year bond but investors shun the Singapore dollar-denominated bond because of worsening pessimism for the Singapore dollars.
The SSBs tracks the interest rate of the CPF retirement fund at 2.5% and is open to foreigners. The funds will then be managed by sovereign wealth fund company Temasek Holdings under the wife of Prime Minister Lee Hsien Loong. A major factor why SSBs are facing low demand is because of the numerous reports of losses by Temasek Holdings, with a huge bombshell announcement made in July where Temasek Holdings lost S$24 billion in the financial year of 2016.
Speaking in Parliament last month, Education Minister Ong Ye Kung blamed the poor take-up rate of SSBs due to “lack of public awareness and understanding of the saving bonds”. It is very likely that Singapore is raising the cash fund to meet the CPF payout of the coming baby boomers from the 1950s who are turning 67 years old in the following decade. As most of Temasek Holdings’ assets are locked in non-cash assets like shares and properties, it is unlikely for the sovereign wealth fund company to meet the cash demand when the retirees start withdrawing in a lump sum.
In recent years, Singapore Prime Minister Lee Hsien Loong has implemented new CPF policies like raising Retirement Sum and enacting CPF Life to mitigate the cash demand of lump sum withdrawal, however, the delay tactic has caused Singaporeans to sacrifice their retirement and continue to work into their twilight years.