SGS and T-bills are marketable debt instruments issued by the Government of Singapore through the Monetary Authority of Singapore (MAS). The terms of issuance are governed by the Government Securities Act and the Local Treasury Bills Act respectively.

The Singapore Government is obliged to pay the holders of SGS and T-bills a fixed sum of money on the maturity date of the securities. When you invest in SGS and T-bills, you are lending your money to the Singapore Government in exchange for interest payments. Although SGS cannot be cashed in with the Singapore Government before their maturity dates, investors can sell them at the prevailing market prices on the secondary market to other investors like banks. 

T-bills are short-term debt securities that mature in one year or less from their issue date. T-bills are bought and sold at a discount, i.e. at a price less than their face (par) value, and when they mature, the Government will pay the holder of the T-bill an amount of S$ equivalent to the face value of the bond. Therefore, the interest earned on the T-bill is the difference between the purchase price of the security and its face (par) value. The Singapore Government issues T-bills of 3-month and 1-year maturities.

SGS refers to bonds that pay a fixed rate of interest (called the coupon) every six months for the life of the securities and then their face (par) values on maturity.In Singapore, SGS bonds are issued with maturities of 2, 5, 7, 10 and 15 and 20 years.

SGS bonds and 1-year T-bills are issued according to an annual issuance calendar that is published on the SGS website. The calendar will specify the issuance dates of the SGS bonds and 1-year T-bills – the auction dates will typically take place 3 business days before the issuance dates. The calendar is accessible here.
Prior notice about SGS bond auctions is published on the SGS website and also advertised in the major newspapers, typically a week ahead of the auctions.

3-month T-bills are issued weekly and the auctions are conducted every Monday. Advance notice about the weekly Monday auction is announced on the previous week’s Wednesday via the SGS website. 

In a SGS auction, participants can choose between submitting a competitive or non-competitive bid.

A competitive bid is one where you have to specify the price (to be expressed in terms of percentage yield) that you are willing to pay for the SGS. You may or may not be allotted the securities after the auction, depending on how good your price is relative to the prices submitted by all the other competitive bidders. In the context of SGS auctions, a lower yield represents a more competitive bid as the bidder is indicating that he/she will accept a lower interest rate. 

A non-competitive bid is one where you do not specify a price (to be expressed in terms of percentage yield) but you are willing to be allotted the SGS at a uniform yield computed based on the results of the competitive tenders. Non-competitive bids of up to S$1,000,000 per individual investor for T-bills and S$2,000,000 per individual investor for SGS bonds are allowed and all non-competitive bids will be satisfied first. The balance of the amount to be issued is then awarded to those who have submitted competitive bids. In all SGS auctions, 40% of the total issuance amount is reserved for non-competitive bids – if the amount of non-competitive bids exceeds the 40%, the SGS will be allocated to the bidders on a pro-rated basis.

Individual investors who purchase SGS issued after 1 July 2009 will have their holdings custodised via book entry at the Central Depository (CDP) instead of with the SGS agent banks. With CDP, individual investors will have the advantage of a dedicated SGS custodian, that offers the convenience of a consolidated account statement for their S$ equity and SGS holdings. Individual investors must have an existing individual CDP account to invest in SGS. It is free of charge to open a CDP account – find out more at http://www.cdp.com.sg

Individual investors with SGS holdings issued before 1 July 2009 will continue to custodise these with the Primary Dealer banks through which they had originally bid for the SGS. They will be given the opportunity to migrate their entire holdings of SGS to CDP at a date to be announced by their agent banks. No fees are expected to be charged for this exercise.

Only Primary Dealers (PDs) in the SGS market are allowed to submit bids at the SGS auctions. However, should you wish to participate in the auctions, you can submit your bids through any of the PDs or through any Secondary Dealers who will submit bids to the PDs on your behalf.

You may purchase SGS at primary auctions or in the secondary market.

i) At a Primary Auction
After the auction announcement, the most convenient way for most individual investors to submit bids for SGS is through the DBS, UOB and OCBC ATMs. For the weekly T-bill auctions, the application window at the ATM is open between Wednesdays 6pm to Fridays 9pm.  Similar to an IPO application, you will need a valid individual CDP account number and your bank account will be debited for the full bid amount at the point of application. For reopened bonds, the amount debited will be 115% of the bid amount to take into account capital gains and accrued interest, since the market price of the reopened bond is only known after the auction. After an auction, successful bidders will receive a statement notification from CDP, typically the next business day after the issuance date. .

ii) In the Secondary Market
As SGS are custodised with CDP, you can approach the branches of any of the SGS agent banks/dealers to sell your holdings at the most competitive market price available. Transaction fees may apply. The purchase/sale of SGS will be reflected in your CDP statement.

The latest SGS prices are published once a day and are available from 6:00pm onwards on the SGS website at https://secure.sgs.gov.sg/apps/goto/?app=dailyPrices. This represents the average of the day’s transacted bid rates obtained from the brokers.

Historical SGS prices can also be found on the SGS website at http://www.sgs.gov.sg/sgs_data/data_hprices.html 

CDP will charge investors an administrative fee of 0.08% (8 basis points) per annum of the face value of the SGS per annum. This administrative fee will be deducted during each coupon payment or redemption of the SGS and T-bills, and is subject to a minimum of $1.50 per deduction. No fees are deducted if the individual investor sells the SGS bonds and T-bills prior to the coupon and/or principal payment events. 

For 3-month T-bills, this is equivalent to a 0.02% (2 basis points) fee of the nominal investment amount payable at redemption. For SGS bonds with half-yearly coupon payments, the fee is 0.04% (4 basis points) of the nominal investment amount payable during coupon payment and at maturity.

The following examples help to illustrate the impact of the CDP fees on the yield obtained by individual investors from their T-bill and SGS investments. Please also refer to Questions 22 and 23 for a more detailed discussion on measuring the yield on your SGS investments. 

The administrative fee based on the 0.02% calculation = $5,000 X 0.02% = $1.00. However, the minimum fee of $1.50 applies.

However, the minimum fee of S$1.50 applies.

Approximate (annual) return to investor = Bond interest – ($1.5x2)
                                                      = (0.0253 x $3000) - $3 = $72.9 

(a) If the bond had appreciated in price to $102,
                                        Return = [(102-100)+4]/100 *100 = 6%

3) Yield-to-maturity, by far the most widely used return measure in the bond market, combines the coupon income of a bond and the capital gain or loss from holding the bond to maturity. It also considers the timing of the bond's cash flows and interest-on-interest, although it assumes that the coupon payments can be reinvested at an interest rate equal to the yield-to-maturity. As a very simple example, assume that you bought a bond with 1-year left to run at a price less than the face value of the bond e.g. S$95. The coupon interest of the bond is S$4. The capital gain at maturity is (S$100-S$95) = S$5. Therefore, the total gain for you is S$9. The bond's yield-to-maturity is (9 / 95 x 100)% = 9.47% from the present till the maturity of the bond.

Treasury bills do not have coupon payments and are issued at a discount. Therefore, the yield that you get upon the maturity of the bill is the difference between the purchase price and the maturity price. For example, if you pay S$95 for a Treasury bill with a face value of S$100 at an auction for a 1-year Treasury bill, your yield to maturity, or amount earned if you hold the bond for one year, is (S$100-S$95) / 95 x 100 = 5.26%.