You probably have heard a lot about the Singapore Savings Bonds (SSB) and have formulated your investment strategy for it. Even my colleague who did not study finance can tell me that she will churn her SSB for newer ones if interest rate rises. Having studied finance and traded Singapore Government Securities (SGS) before, I should do one better than hers.
Before going into my investment strategy for SSB and SGS, let us understand what are the characteristics of SSB and SGS. SGS is the traditional government bond which is backed by the government. Like any other bonds, its price will rise if interest rate falls and fall if interest rate rises. SSB, on the other hand, is capital-guaranteed by the government. Regardless of the direction of interest rate, its price will never rise or fall. In fact, you cannot trade SSB in a secondary market. You can only sell ......