Bonds Questions


What Is Bond Financing?

With Bond Financing, you may use assets such as cash, shares, Exchange Traded Funds (ETFs), unit trusts, or bonds as collateral to purchase bonds with financing. This allows you to free up cash and optimize your portfolio to achieve your financial goals earlier.

 

How Does Bond Financing Work?

Using your existing portfolio as collateral, you may purchase bonds with financing to increase your portfolio yield without any additional cash outlay.

 

Illustration:

Existing Grade A portfolio receiving 4% coupon p.a. $250,000
Annual coupons received $10,000
Available loan amount if purchase Grade A bonds $625,000
 

Purchase 2 more bonds for $500,000 @ 4% coupon p.a. on financing

New total portfolio receiving 4% coupon p.a. $750,000
Annual coupons received $30,000
Less financing charges of 2.68% on $500,000 loan $13,400
Net coupons received $16,600

 

By purchasing bonds with higher coupon rates than our bond financing rate, you will be able to profit from the difference in rates and increase your bond portfolio yield. This is called Positive Gearing, which takes advantage of our low bond financing rates.

 

What Are Our Financing Rates?

Here are our bond financing rates:

 

Which Bonds Are Available For Financing?

We offer over 100 bonds to finance. Find out if a bond is available for financing by using our Margin Finder Tool here.

 

How Much Can I Borrow?

The amount of loan you are able to get depends on several factors such as the grading of your collateral, the grading of securities you intend to purchase, as well as your approved loan amount.

To find out how much you can borrow based on your collateral and purchases, please view the table below:

Step 1: Choose your collateral type
Step 2: Choose your grade of purchase.

* We do not accept Grade C securities as collateral, however you may use higher grade securities as collateral to purchase Grade C securities.
* To find out your approved loan amount or to increase it, kindly contact your Financial Advisor (FA) or Trading Representative (TR).

 

How Do I Start Using Bond Financing?

Step 1: Open A Margin Account

To open a Margin Account, visit any of our Phillip Investor Centres in Singapore here with your NRIC, or apply for one online here.

The account takes about 1 week to open upon applying.

 

Step 2: Deposit Your Collateral

After your Margin Account has been opened, you may transfer cash or existing securities into it to use as collateral.

Here are the ways to do so:

1. To transfer cash into your Margin Account, you may:

  • Do an Electronic Payment for Shares or Internet Banking payment from your respective bank websites or;
  • Drop a cheque at any of our Phillip Investor Centres here or;
  • Make cash payment at our Raffles City Branch:
    250 North Bridge Road,
    #06-00, Raffles City Tower
    Singapore 179101

 

2. To transfer securities from other Phillip Securities Trading Accounts into your Margin Account:

kindly contact your FA/TR for assistance. Don’t have their contact? Kindly give our customer hotline a call at (+65) 6531 1555 to inquire.

 

3. To transfer in securities from other counter-parties into your Margin Account:

kindly contact your FA/TR for assistance.

 

4. To transfer in your securities from CDP into your Margin Account:

  • Visit any of our Phillip Investor Centres here with your NRIC or;
  • Contact your FA/TR for assistance

Please note CDP transfer charges are $10.70 per counter, which will be deducted from your trading account.

 

Step 3: Start Purchasing

After your collateral or funds have been transferred into your Margin Account, you may view your available loan amounts by logging in to our POEMS 2.0 online trading platform and start purchasing bonds with financing.

Financing may be available for selected new bond issues. Kindly contact your FA/TR or our Bond Desk at (+65) 6212 1818 to find out more.

Learn more about trading bonds with us by viewing the following articles in our FAQ:

  • How To Trade Bonds Online With POEMS 2.0?
  • How To Trade Bonds?

 

What Are The Risks Of Bond Financing?

Leverage Risk

As Bond Financing involves the use of leverage, your portfolio may experience higher volatility due to magnified gains and losses.

 

Margin Calls

When your collateral value falls below a required margin ratio, you may be subjected to a margin call. This means you may potentially lose more than your initial investment in the event of adverse price declines or in cases of bond defaults.

Learn more about our margin ratios and margin calls here under ‘Information Sheet’.

 

Bottom Line

Bond Financing is a powerful tool able to optimize your portfolio and increase its yield, however investors should be aware of the risks that come with financing.

To find out more about Bond Financing, please do not hesitate to contact your FA/TR or our Bond Desk at (+65) 6212 1818 for assistance.

What Are The Fees And Charges For Bonds?

We do not charge brokerage or commission fees for wholesale bond trades.

All indicative bond prices quoted are net of fees.

  • No commission fees
  • No processing fees
  • No platform fees
  • No custody fees for bonds cleared via CDP (local bonds only)

 

Custody charges

  • Custody charges for Bonds cleared via Clearstream / Euroclear (foreign bonds only) are 0.05% p.a. on market value (charged on a monthly basis).
  • No custody charges for Bonds cleared by CDP (local bonds only).

 

Bond transfer charges

  • Foreign bonds transfer-in charges from counter-parties – USD$18 per bond/instruction
  • Local bonds transfer-in charges from CDP – SGD$10.70 per counter
  • Bond transfer-out charges (out of Phillip Securities) – 0.5% of the bond nominal value for all bonds

How Do I Trade Bonds?

Step 1: Open A Trading Account

To apply for a new trading account, you may visit any of our branches located around Singapore here, bringing along your NRIC (for foreigners: passport/overseas identification card).

Alternatively, you may open a custodian trading account online here.

If you have an existing trading account but are unable recall your account number or password, kindly give our customer hotline a call at (+65) 6531 1555 to retrieve it.

 

Step 2: Get Bond Details And Quotes

After your trading account is opened, you may start trading bonds.

To get bond details and quotes, please view the options below. Kindly note that bond price quotes are indicative.

 

1. Phillip Bond Website

Visit our bond website to search for your bond.

 

2. POEMS 2.0 Platform

Log in to our POEMS 2.0 platform.

Go to the ‘Prices (LP1)’ tab and select the ‘Bonds’ tab.

You may search for your bond via the search bar or filter the list by Issuer name or Currency.

 

3. Phillip Bond Desk

Contact our Bond Desk at (+65) 6212 1818 or email at bonds@phillip.com.sg.

You may request for accrued interest details and subscribe to receive our daily price quotes email.

To receive email notifications on new bond issues, request to be added to our notification list.

 

4. Financial Advisor / Trading Representative

Contact your FA or TR for bond details or price quotes.

Don’t have their contact? Kindly contact our customer hotline at (+65) 6531 1555 to inquire.

 

Step 3: Place A Bond Trade

You may place bond trades through the following ways:

  1. Place the trade online through our POEMS 2.0 online trading platform. Learn more by viewing our FAQ ‘How To Trade Bonds Online With POEMS 2.0?’.
  2. Contacting your Financial Advisor or Trading Representative
  3. Contacting our Bond Desk at (+65) 6212 1818

 

Funding Your Purchases

Prior to placing buy trades, we encourage clients to ensure there are sufficient funds in their trading account beforehand.

However, post-funding arrangements may be explored on a case by case basis. Please contact your Financial Advisor or Trading Representative for assistance.

Alternatively, find out how you may purchase more bonds without additional cash outlay with Bond Financing here.

How To Trade Bonds Online With POEMS 2.0?

POEMS 2.0 is our award-winning online trading platform that allows clients to trade bonds conveniently online. Explore our Demo Account here.

 

Step 1: Viewing Bond Details And Quotes

To view bond prices and details, log in to POEMS 2.0 and select either the ‘Prices (LP1)’ or ‘Trade (LP2)’ tabs at the top.
Then select the Bonds tab under the ‘View Price’ window.

You should see this window:

Bond details can be viewed through this window. You will be able to view details such as Currency, Coupon rate, Maturity date, Call date, Bid yield (%), Bid price, Offer price, Offer yield (%) and Bond Name.

You may search for specific bonds by:

  • Typing its name into the search bar
  • Filtering by its Issuer and/or Currency

Please note that all information displayed are indicative.
The list of bonds is not exhaustive. To find out more, kindly contact your Financial Advisor / Trading Representative or our Bond Desk at (+65) 6212 1818.

 

Step 2: Placing A Bond Trade

To place a bond trade, simply double-click on a bond or right-click it and select ‘Trade’ from the options menu.

A trade window will appear as below, showing details including the Bond name, Issuer, Coupon rate, Maturity date, Bid yield (%), Bid price, Offer price and Offer yield (%):

After deciding on your order and price, key in your password and submit the order.

 

Step 3: Managing Your Order

After placing your bond trade, the order should appear under the ‘Order Status’ window where you may view, amend or withdraw it if it has not been accepted.

You may view the ‘Order Status’ window either through the ‘Order Status’ tab at the top, or view it at the bottom left corner of the ‘Trade (LP2)’ tab.

 

Bottom Line

To learn more about our POEMS 2.0 trading platform, check out our Demo Account here below or contact your Financial Advisor or Trading Representative.

Not yet an account holder? Open an account at any of our branch locations here or apply for a custodian account online here.

What Are Some Factors To Consider Before Investing In Bonds?

(a) Investment objective and timeline

Bonds offer a way of diversifying one’s investment portfolio. By selecting bonds with strong issuer financial/credit standing can provide a regular stream of interest income and reduce your portfolio volatility.

Investors will have to decide on his/her personal investment timeline when selecting bonds based on their maturity dates. This involves cash flow and the amount of risk an investor is prepared to bear. Generally, the longer the period of investment, the higher the return and risk involved. Longer tenor bonds are more sensitive to movement of interest rates and investors who invest in these bonds may potentially incur greater capital gains or losses if he/she sells off the bond investments before maturity.

 

(b) Features of the Bond

There are different types and grades of bonds, from simple plain vanilla bonds to those with call/put options or convertible covenants. Here are some features to take note of:

(i) Issuer
A Government or corporation that borrows by issuing bonds and repays investors with regular coupons.

(ii) Principal
The nominal value of the bonds issued or amount of money borrowed by the issuer that will be repaid to the investor upon maturity of the bond. Commonly also known as face value, or par value.

(iii) Maturity Date
The date where the issuer must return the principal or the face value to the investor.

(iv) Coupon Rate
Interest payments made on a bond by the issuer in regular periods to repay the investor for holding the bond. Coupons are usually paid semi-annually. For example, a $1,000 bond paying $40 a year has a coupon rate of 4.0%.

(v) Yield
The annualized return earned on a bond. It is calculated by dividing the coupon rate by the price of the bond and expressed in percentage terms.

 

(c) Risks of investing in Bonds

Bond investments do not come without risks; some of the risks are highlighted below:

Market risk
The value of the bond is subjected to interest rate changes as well as demand and supply forces. Bonds, in particular, are sensitive to interest rate fluctuations and bond prices tend to move in opposite directions with interest rates. This risk is more pertinent if the investor decides to sell the bond and not hold it to maturity.

Credit risk
Credit risk highlights the fact that the issuer may default on payment of the coupon, and even the principal amount if the issuer is facing problems meeting its obligations as promised. This is also known as default risk or issuer risk.

Liquidity risk
When there is a lack of buyers or sellers in the market, the investor may not be able to execute the trade or may be forced to trade at a value significantly far away from the investor’s desired price. This is deemed as liquidity risk.

Foreign exchange risk
Investors are exposed to fluctuations in foreign exchange rates when they trades in bonds denominated in a currency other than their own functional currency. Depending on the currency movement, this may erode returns on the bond investment.

 

Investors are advised to consider the risks of bond investments by reading the bond prospectus/information memorandum/term sheet or by seeking advice from a qualified financial adviser or representative before committing to any bond purchases.

How does the settlement of Bond works?

This is an illustration on how the settlement of a bond works.

For example, SGD 250 000 Corporate Bond was bought at the price of 102.00 % (of the principal amount) on 23 March 2015. (Trading account to be pre-funded) It carries a coupon of 5.90% per annum and matures on 17 July 2017. The corporate bond was issued on 18 July 2014.

Additional information
Accrued interest: 68 days. Yield to maturity: 4.96%. Coupon payment: 17 Jan & Jul

The investment is as follows (Assume the day convention is 365 days):

Principal amount payable
= Principal x Bond price
= SGD 250,000 x 102.00/100
= SGD 255,000

Accrued Interest payable
= Principal x coupon x number of days after last coupon payment
= SGD 250,000 x 5.90/100 x 68/365
= SGD 2,747.95

Total amount payable by the investor client
= Principal amount payable + Accrued interest payable
= SGD 255,000 + SGD 2,747.95
= SGD 257,747.95

Charges
• There are no commission for bond trading. A percentage spread is included in the price of the bond quoted to the client.
• There is a custody fee of 0.05% p.a of the market value and GST payable monthly for bonds under custody with Clearstream/Euroclear.

Am I guaranteed to get the specific quantity of bonds that I placed an order for?

It depends on the availability of the quantity of bonds in the market at the time of purchase.

Do I need to be Accredited Investor to purchase bonds?

Please note that corporate (OTC) bonds are only available for sale to Accredited Investors or in minimum denominations of $200,000 per transaction

For relevant forms and documents required to be an Accredited Investor, please click here.

Definition of an Accredited Investor

An Accredited Investor (Individual) is:
An individual with net personal assets exceed in value of SGD 2 million (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount. Loans, overdrafts and/or credit facilities which the individual has with other banks and financial institutions will have to be deducted from his gross personal assets to generate his total net personal assets;

or

Whose income in the preceding 12 months is not less than S$300 000 (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount.

An Accredited Investor (Corporation) is:
The company’s total net assets (i.e. assets minus liabilities) must exceed SGD 10 million (or equivalent in foreign currency) as determined by the most recent audited balance-sheet of the company.

How do I receive my proceeds after bond maturity?

Upon maturity, the proceeds will be credited into respective account’s ledger for bonds under Phillip custody. For bonds under CDP custody, proceeds will be credited into bank account linked to CDP account.

How do I receive my coupon payments?

For bonds under Phillip custody, coupon payment will be credited into account ledger.
For bonds under CDP custody, coupon payment will be credited into bank account linked to CDP account.

How to make payment for the bond?

Investor can simply do an EPS (Electronic payment for share) or deposit a cheque to their own trading account. Investors will need to pre-fund their account prior to bond execution.

What are the bonds that I can invest in?

Investors can access more than 200,000 bonds globally trade bonds denominated in 9 major currencies.
AUD, CAD, CNY, EUR, GBP, HKD, NZD, SGD & USD

Is the list of bonds on the website all Phillip had to offer?

Those bonds listed on our website are just some of the bonds we offer, as the list is exhaustive, do contact the bond desk if you are looking for any specific bond or have requirements for tenure or yield. Our Bond Specialist will be able to customise a list that meets your requirements.
Please contact our Bond Desk at 6212 1818 or email us at bonds@phillip.com.sg for more information.

Do I need to open a new Phillip account to invest in bonds?

No, you can use your existing Cash Management, Custodian or Margin Financing accounts to invest in bonds.
For online trading of bonds, only Custodian and Margin Financing accounts have access to online trading of bonds.

What is the minimum investment for Bonds?

The minimum investment for bonds will be subject to the bond issuance. For retail bonds, it is usually traded in multiple of S$1K. For wholesale bonds, it is usually traded in multiple of S$250K.
Please contact our Bond Desk at 6212 1818 or email us at bonds@phillip.com.sg for more information.

How can I check the price for specific bonds?

To check prices for specific bonds, investor may contact the desk directly at 6212 1818 for an indicative quote.

Must I hold the bond until maturity?

No, investor can always sell the bond on the market at market price anytime subject to demand and supply.
For perpetual bond/securities with no maturities, investors can either wait for the bond next call date subject to issuer call or sell the bond on the market at market price anytime subject to demand and supply.

How can I place a bond order?

Investor can contact our Bond Desk or Trading Representatives to place a bond order.
Bond Desk can be reached at 6212 1818 or via email us at bonds@phillip.com.sg for more information.