This article is educational content explaining how a category of government bond generally works. It is not investment advice, and it does not describe any specific current event, company, or security.
A bond that can be cashed in, in full, for exactly what was originally paid in, on nothing more than an online instruction submitted before the final business day of the month, seems to defy how bond markets normally behave. Prices for most government and corporate debt move daily, and exiting before maturity usually means accepting whatever the market will pay. Singapore Savings Bonds (SSBs), issued by the Monetary Authority of Singapore (MAS) on behalf of the Singapore government, are built specifically to avoid that outcome. The mechanism behind it starts with how the bond’s interest rate is set, and ends with why holders are never meant to sell the bond to one another at all.
How the step-up schedule is built
Each Singapore Savings Bond has a ten-year lifespan, but the interest it pays is not a single fixed coupon repeated every year. Instead, MAS sets a distinct interest rate for each of the ten years at the moment the bond is issued, and those rates are structured to rise, or “step up,” the longer the bond is held. A holder who redeems in year two earns a lower average return than one who stays to year ten, because the later years are deliberately weighted with higher rates.
These step-up rates are not chosen arbitrarily. They are derived mathematically from the prevailing yield curve of Singapore Government Securities (SGS), the benchmark bonds Singapore issues to institutional investors. MAS builds the schedule so that the average return over the full ten years, if held to maturity, roughly matches the yield on a ten-year SGS bond at the time of issuance. In practice this means the schedule is a translation of wholesale bond-market pricing into a format retail savers can use, with the rising-rate design meant to reward patience without requiring anyone to guess where interest rates will move next.
Why the bonds cannot be bought or sold
Unlike most government bonds, SSBs have no secondary market. A holder cannot sell an SSB to another investor on an exchange or over the counter, and nobody can buy one from an existing holder. The only route in is applying directly through the government’s application channels, and the only route out before maturity is redeeming it directly back to the government through the Central Depository (CDP), which administers the bonds on behalf of individual holders.
This restriction is a deliberate structural choice, not an oversight. Because the bond is never traded, its value to the holder is never subject to the price swings that affect tradable bonds when market interest rates move. A tradable bond’s price falls when rates rise, since new bonds then offer better yields, exposing sellers to a capital loss if they need to exit early. By removing tradability entirely, SSBs also remove that channel of loss, at the cost of the liquidity and price discovery that a secondary market would otherwise provide.
Redeeming early without losing principal
The redemption process is what makes the no-secondary-market design workable for individual savers. Each month, holders can submit a redemption request for some or all of their holding, typically before a mid-month cutoff, with funds paid out early in the following month. Because there is no market price to consult, the redemption amount is calculated simply as the original principal invested plus any interest accrued up to that point, with a nominal transaction fee applied rather than a market-based discount.
The consequence is that a saver redeeming a Singapore Savings Bond after three years, for example, gets back the full amount originally invested plus the interest already earned for those three years, never less. What is forfeited is only the higher step-up rates scheduled for the later years that were not reached, not any portion of the principal or interest already accumulated. This structure, a fixed and rising rate schedule paired with a government-only redemption channel, is what allows the bond to offer monthly flexibility that ordinary tradable bonds, by their nature, cannot.
