The main buyers of SGS (Singapore Gov't Securities or bonds, or IOUs, in fact) are traditionally banks and life insurance companies, who need to invest their client's savings and policy premiums in very safe instruments, in order to maintain a minimum capital adequacy ratio, set by the MAS, whilst earning a modest interest rate in order to pay operating expenses, guaranteed interests and policy cash values.
This new issue comes with a coupon (interest) rate of 2.875% p.a., thus setting the maximum return for bank deposits or short-term non-participating endowment policies, like the recent one sold by a local insurer, which offered a fixed return of 2.0% p.a. for a 2-year plan.
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