Monday, March 30, 2015

Singapore Savings Bond

MAS introduced a new product - Singapore Savings Bond.

Much have been written about it by various bloggers. The pros are obvious:

1. No lock in period
2. Higher interest rates than fixed deposit - similar to government bonds/treasury bills
3. Backed by the government (99.9% safe)

This is like having your pie and eating it!

I personally think this is a good product, who can argue against the previous points if you are looking for a risk-free return with a higher rate of return? In any case, i think the government will probably restrict the amount an individual can invest this in... otherwise, i think a lot of cash rich Singaporeans will just dump all their money in!

I do wonder a little of the motivations though: This will soak up the liquidity in the market..... banks will be 'forced' to offer a higher interest rates to attract depositors to place money with them. This would then mean that they will need to charge a higher rate on their loans (housing etc).

This is like a tightening of the money supply and would have a deflationary impact on the economy, and act as another damper on the housing market.

Am i right? Or am i worrying too much?

No comments:

Post a Comment