MAS studying feasibility of inflation-linked bonds
The Monetary Authority of Singapore (MAS) is studying the feasibility of inflation-linked bonds, amongst other financial instruments, to help retail investors achieve better returns on their savings.
SINGAPORE: The Monetary Authority of Singapore (MAS) is studying the feasibility of inflation-linked bonds, amongst other financial instruments, to help retail investors achieve better returns on their savings.
This is in the light of current low interest rates on domestic bank deposits, which are expected to stay low for some time in view of the still fragile recovery in the major economies.
Nominated MP Tan Su Shan had suggested the possible issuance of inflation-linked bonds for the retail market to help Singaporeans suffering from savings erosion.
Minister of State for Defence and Education Lawrence Wong said the government is mindful of problems the current environment poses to savers and depositors.
He pointed out that investment alternatives such as corporate bonds and Singapore government securities are available to retail investors.
Mr Wong, who is also a board member of the MAS, said it remains best to make the investments of ordinary Singaporeans simple and conservative.
Speaking in Parliament on Monday, Mr Wong said: "We have to recognise that market pricing for inflation-linked bonds under the current very low interest rate environment could mean investors having to pay a large premium for such bonds."
"Furthermore, investors will suffer a loss should inflation fall below expectations," added Mr Wong.
According to a MAS spokesperson, the introduction of inflation-linked instruments would require a detailed study by the Finance Ministry and the central bank.