When investing in Singapore bonds — SGS, T-bills, SSBs, or corporate bonds — two yield measures are commonly referenced: yield to maturity (YTM) and current yield. These look similar but measure different aspects of a bond’s return. Understanding the difference helps Singapore investors make better fixed income decisions. This is for educational purposes only and does not constitute financial advice.
What Is Current Yield?
Current yield = Annual Coupon Payment ÷ Current Market Price × 100%. Example: a Singapore corporate bond with face value S$1,000, 4% coupon (S$40/year), trading at S$950. Current yield = S$40 ÷ S$950 = 4.21%. Current yield tells you the income return on what you pay today. However, it ignores two important factors: (1) capital gain or loss if held to maturity, and (2) the time value of money for bonds with multiple years remaining.
What Is Yield to Maturity (YTM)?
YTM is the total expected annualised return if you buy a bond today and hold to maturity, assuming all coupons are reinvested at the same YTM rate. YTM accounts for: all future coupon payments, the capital gain (bought below par) or loss (bought above par) at maturity, and the time value of money for all cash flows. YTM is the standard benchmark in the Singapore bond market. For Singapore T-bills and SSBs, the cut-off yield per auction is effectively the YTM — reflecting current market demand.
Key Relationships: Par, Premium, and Discount Bonds
Bond bought below par (discount): YTM > current yield — capital appreciation at maturity adds to coupon income. Bond bought at par: YTM = current yield = coupon rate. Bond bought above par (premium): YTM < current yield — capital loss at maturity reduces total return vs coupon rate. The Bond Yield to Maturity Calculator on The Kopi Notes computes exact YTM for any bond given coupon, purchase price, face value, and years to maturity.
Singapore T-Bills, SGS and SSBs: Which Yield Applies?
T-bills (6-month, zero-coupon): No coupon, so current yield doesn’t apply. Discount yield and YTM are the relevant measures. SGS bonds (2–30 year, coupon-paying): YTM is the primary measure. The MAS SGS yield curve shows YTM across all maturities. SSBs: The ’10-year average return’ is functionally the YTM for 10-year holding. Use The Kopi Notes’ T-Bill, SSB & Fixed Deposit Comparison Calculator to compare all three side-by-side.
Practical Tips for Bond Investors in Singapore
Always compare using YTM: For bonds of similar risk but different coupons and prices, YTM is the correct apples-to-apples comparison — not current yield. Reinvestment risk: YTM assumes coupons are reinvested at the same rate. If rates fall, actual returns may fall below YTM. Duration and rate sensitivity: A 1% rise in yields on a 10-year SGS bond causes approximately 8%–9% price decline; for a 2-year bond, the impact is far smaller. For REIT vs bond spread analysis, use The Kopi Notes’ S-REIT Yield vs SGS Bond Spread Calculator.
Frequently Asked Questions
What is the difference between yield to maturity and current yield for bonds?
Current yield is annual coupon ÷ current price — it shows income return only. YTM is the total annualised return if held to maturity, including coupon income plus any capital gain or loss. YTM is the more complete and widely-used measure for bond investment decisions.
Which yield measure should Singapore bond investors use?
YTM is preferred because it accounts for total return including capital gains/losses and time value of money. Current yield is a quick approximation useful for rough comparisons but should not be the sole basis for investment decisions.
How do Singapore T-bill yields relate to YTM?
T-bills are zero-coupon — the yield quoted at each auction is a discount yield convertible to YTM. Since T-bills have no coupon, YTM is simply the annualised return from buying at the discounted price and receiving face value at maturity (6 months or 1 year later).
If a Singapore bond trades above par, is YTM higher or lower than the coupon rate?
If a bond trades above par (premium), YTM is lower than the coupon rate — you receive less than you paid when the bond matures at face value. Conversely, a bond trading below par (discount) has YTM higher than the coupon rate, as capital gain adds to total return.
Can I use YTM to compare SGS bonds with SSBs?
Yes — YTM is a useful common basis. The SGS yield curve shows YTM for government bonds at various maturities. For SSBs, the ’10-year average return’ is functionally the YTM for a 10-year holding period. However, SSBs offer unique early redemption flexibility not captured by YTM alone.