FIXED INCOME · Singapore Investing Glossary
Callable Bond Singapore
A callable bond is a bond that gives the issuer the right — but not the obligation — to redeem it before the scheduled maturity date at a pre-agreed call price. In Singapore, callable bonds are commonly issued by banks, property developers, and large corporates listed on the SGX Bond Market. Investors receive a higher coupon to compensate for this call risk.
This article is for informational purposes only and does not constitute financial advice. Always consult a licensed financial adviser before making investment decisions.
Table of Contents
What Is a Callable Bond?
How Call Provisions Work
Yield to Call (YTC) vs Yield to Maturity (YTM)
Callable Bonds in the Singapore Market
Risks and Considerations for Singapore Investors
What Is a Callable Bond?
A callable bond contains an embedded call option that benefits the issuer. If interest rates fall significantly after the bond is issued, the issuer can redeem the bond early, refinance at lower rates, and save on interest costs — just as a homeowner in Singapore might refinance their HDB loan when rates drop.
For investors, this creates reinvestment risk: when the bond is called, you receive your principal back but now must reinvest at the prevailing (lower) interest rates. This is why callable bonds must offer a higher coupon than equivalent non-callable bonds to attract buyers.
Most SGX-listed corporate bonds issued by Singapore banks and property developers — such as those by CDL Hospitality, Frasers Property, or CapitaLand — include call provisions.
How Call Provisions Work
Call provisions specify:
- Call date(s): When the issuer may exercise the call option. Some bonds are callable on any coupon payment date; others have specific call windows.
- Call price: Usually par (100) or a small premium above par (e.g. 101). This compensates investors slightly for early redemption.
- Call protection period: A lockout window (often 3–5 years for Singapore corporate bonds) during which the issuer cannot call. This gives investors minimum yield certainty.
Example: A 7-year Singapore corporate bond issued in 2022 with a 5-year call date (2027) at par means the issuer can redeem early from 2027 onwards if market conditions favour refinancing. If rates in 2027 are lower than the bond’s coupon, you should expect a call.
Yield to Call (YTC) vs Yield to Maturity (YTM)
For callable bonds, relying solely on Yield to Maturity (YTM) can mislead you. The more conservative and relevant metric is Yield to Call (YTC) — the annualised return assuming the bond is called on the earliest call date.
| Metric | Assumption | When to Use |
|---|---|---|
| YTM | Held to maturity — no early call | Non-callable bonds, or if call is unlikely |
| YTC | Called on first call date | When rates are likely to fall; callable bonds |
| Yield to Worst (YTW) | Lower of YTM and all YTCs | Conservative baseline — always calculate this |
As a Singapore bond investor, always look at the Yield to Worst (YTW) — the worst-case yield scenario across all possible call dates. This is what institutional investors use.
Callable Bonds in the Singapore Market
The Singapore bond market has a healthy supply of callable issues, particularly in:
- Bank perpetual securities: Singapore banks (DBS, OCBC, UOB) issue perpetual securities with call dates — technically not bonds but functionally similar. These are popular with retail investors for their higher yields (often 3.5–5.5% in Q1 2026) but carry call and extension risk.
- Property developer bonds: Frasers, Mapletree, CapitaLand, and CDL regularly issue SGD bonds with call provisions in the 5–7 year tenor range.
- Retail bond offerings: Some Singapore Exchange-listed bonds (available in S$1,000 denominations) include call features. Always read the prospectus for call terms.
SGX’s bond screener at sgx.com lists indicative yields and call dates for all listed bonds. For context on the broader bond landscape, see our Investment Grade Bonds Singapore guide.
Risks and Considerations for Singapore Investors
Call risk: The most obvious risk — you lose the high-coupon bond just when you want it most (when rates have fallen). Plan for reinvestment by laddering maturities.
Premium pricing: Callable bonds often trade at a premium, especially when the call is imminent. Buying at a significant premium to call price can result in capital losses if called.
Perpetual call conventions: Singapore bank perpetual securities typically reset their coupon to a spread over the prevailing swap rate if not called. In 2023, several banks globally did not call perpetuals when investors expected them to — causing sharp price drops. This is known as “extension risk.”
Tax treatment: Coupon income from SGX-listed corporate bonds is generally subject to Singapore withholding tax (at 15% for foreign individuals). Singapore residents pay at their marginal income tax rate. Capital gains from bond trading remain tax-free in Singapore as at Q1 2026.
Frequently Asked Questions
Why do companies issue callable bonds?
How do I know if a Singapore bond is callable?
What is Yield to Worst (YTW) and why does it matter?
Are Singapore Savings Bonds callable?
What happens if a callable bond is not called?
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