Case Study Answers of Singapore Government Securities SGS:BAFI1029

BAFI1029 risk management

Based on the information provided along with the question and knowledge in this course, please answer the following 5 questions

QUESTION ONE

“Singapore Exchange (SGX) announced the listing of the world’s largest Chinese pure government bond exchange-traded fund (ETF) for investors to access opportunities in China’s onshore bond markets.

Loh Boon Chye, chief executive officer of SGX, said in a statement, “Global fixed income investors have been turning to Chinese sovereign bonds for added diversification and yields, and this product is a strong addition to our platform. SGX will continue to work with issuers and business partners to develop a multi-asset ETF product shelf that meets the demands of the investment community.””

Source: Nikkei Asia

You are a fixed income securities Manager and Jayden is your friend. He read the news and think the government securities is a good investment and he approached you for help.

a. Explain to Jayden what are Singapore Government Securities (SGS) and the difference between SGS bond and T-bills?

b. One of the primary purposes of SGS market is to provide a benchmark yield curve for corporate debt market. If the zero-rate cure is given as follows, calculate forward interest rates for the second years.

Date	1 Mo	3 Mo	6 Mo	1 Yr	2 Yr	5 Yr	10 Yr
03/10/20	0.212%	0.215%	0.226%	0.235%	0.196%	0.44%	0.86%

c. Assume the following 2-year SGS bond will be issued in Feb 2021, using the term sheet to calculate and explain the duration of this SGS Bond. Suppose the bond yield is continuous compounding.

Bond Information
Issuer		Singapore Government
Instrument		Government Bonds
Currency		Singapore dollars
Maturity Date		01 Feb, 2023
Coupon		1.75% per annum paid semi-annually in arrears on the Face Value of the bonds.
Redemption		Par
Coupon Payment Dates		01 Feb and 01 Aug in each year
Denominations		$100 Face Value for Treasury Bonds
Bond Yield		0.28%
Bond Price		103.42