Dear readers, retail investors can apply to purchase Green Singapore Government Securities (Infrastructure) or Green SGS (Infra) bonds with effect from yesterday (5 Aug 22).
The Green SGS (Infra) bonds are also the first 50-year bonds issued by the Singapore Government and are currently priced at 3.04% per annum, with a coupon rate of 3% per annum.
Green SGS (Infra) bonds will have a maturity date of Aug 1, 2072 and the coupons will be paid semi-annually on Feb 1 and Aug 1 every year for the duration of the bond, starting on 1 Feb 2023.
When I learnt of the Green SGS (Infra) bonds, what struck me first was the 50-years holding period of the bonds. For myself, given my current age, I am not sure whether I will still be around on earth after 50 years. In terms of the bond duration, I believe the bonds will appeal to young investors, say in their twenties and thirties, if they would like to hold the bonds until maturity as they really have holding power in terms of age.
Next, one important aspect that investors must understand is that this product is a bond and hence the bond prices will fluctuate with the market conditions (e.g. bond prices will fall if interest rates increase and vice versa). Hence, an investor who wishes to sell the bond before maturity may lose his capital if price is below what he has paid for.
Last but not least, I believe there are many other comparable products on the market. For example, the Singapore Savings Bonds offers a capital guarantee investment and annual yields of close to 3% for a maximum holding period of 10 years, there is no penalty for early withdrawals.
And there is also the CPF savings, which provides a 2.5% return on CPF ordinary accounts, that can be compounded every year.
Ultimately, the question for investors is whether this 50-years holding period bond is suitable for them. I believe investors who like to be paid 3% interest for the next 50 years and even pass this on to their future generations may embrace the bond.