Dear readers, the application of Astrea 7 PE Bonds ended today at 1200 hrs.
As a quick recap, there were two tranches of Astrea 7 PE Bonds on offer to investors:
Class A-1 Bonds which offer a 4.125% return per annum, with a 5-year mandatory call
Class B Bonds which offer a 6% return per annum, with a 6-year mandatory call
Looking at the interest rates, they seem attractive to investors who like high returns on saving rates as the high interest rates offered by Astrea are one of the highest on the market.
However, with high returns, there are high risks, especially since there is no capital guarantee for the Astrea 7 E Bonds.
The aforementioned risk makes the Astrea 7 PE Bonds unattractive to me. Especially given the current high interest rates, the difference between a 4% to 6% per annum return with what the market can offer in terms of other products (and risk-free somemore!) has narrowed!
For example, in the latest tranche of Singapore Savings Bonds, the Singapore Savings Bonds offer investors an average annual interest of some 2.5%+ (as a caveat, held over 10-years and risk-free!) If we just compare the above to the 4.125% per annum Astrea 7 PE Bond, savers are exchanging just some 1.5% per annum more for Astrea 7 PE Bond for investment risks.
Furthermore, there is currently no apparent discount to the entry price for Astrea 7 bonds. Given Astrea 7 Bonds will trade on the SGX, there is always a possibility that the bonds may trade below PAR value. There are also quite a number of index-based ETFs or stocks in the market now offering around 4% annual dividends but trading at a discount right now, this latter group will definitely be more attractive.