MAS: First issuance of Singapore Savings Bond in 2018 lures investors

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The logo of the Monetary Authority of Singapore (MAS) is pictured at its building in Singapore in this February 21, 2013 file photo. Reuters

The Monetary Authority of Singapore (MAS) announced the over-subscription of the Singapore Savings Bond (SSB), which was opened for application early this month.

According to the central bank, more than 6,300 investors submitted applications amounting to around S$172 million, exceeding the issuance size of S$150 million. This incidence was a first for SSB since the bonds were first issued in October 2015.

MAS said due to the over-subscription, some investors, particularly those who applied for S$41,500 or more of the bonds this month, may not be receiving the full amount that they applied for. Applicants that were not fully allotted should receive a refund to the bank account from which the application was made in one to two business days from January 29.

The SSB allocation mechanism maximizes the number of successful applicants, through the so-called quantity ceiling method.

"When there is an oversubscription, each applicant will be allotted S$500 of SSB, with the amount increasing in multiples of S$500 for every applicant until he has either received the full amount applied for or until all the available bonds have been allotted, whichever comes first," the central bank said.

It added that if the number of applicants is so large that issuing $500 per applicant will exceed the number of bonds available, then the $500 of bonds will be allotted to applicants on a random basis.

"This means that when SSBs are oversubscribed, an investor may not receive the full amount applied for and smaller applications will have a higher chance of being fully allotted. The below illustration shows how applications are filled," it said.

To recall, SSB has not gained much traction when it was initially announced. However, the number of investors has already grown to over 40,000 individuals, holding more than S$1.1 billion of SSB on aggregate as of March 2017.

The details of the next issuance of SSB will be announced on February 1. Investors are given until February 23 to submit their applications.