When it comes to the end of the month, there’s something that Singaporean investors have been looking forward to.
And no, it’s not their monthly paycheck.
The allotment results for the September Singapore Savings Bond (SSB) - SBSEP22 GX22090Z are out, and many investors are rejoicing that their allotment has increased compared to the previous month.
Applicants who applied for $13,000 or lower were fully allotted (so long as they don’t hit their individual SSB limits).
Applicants who applied for S$13,500 or higher were allotted either S$13,000 or S$13,500.
About 55% of these applicants were allotted S$13,500.
This allotment limit was higher than for the August Singapore Savings Bonds (SSB), where the maximum allotment to each individual was S$9,500.
So let’s see if there are any interesting trends we can pick up from the allotment results.
What we learnt from the allotment results
The size of the September issue was S$900 million, slightly higher than the S$700 million issuance last month.
But more importantly, the total amount of subscription fell to S$1.9 billion from S$2.4 billion last month.
This might be a surprise to many given that interest in the Singapore Savings Bonds has picked up over the past month.
One of the reasons might be that the average 10-year yield has fallen from an all-time high of 3.00% to 2.80% this time.
This might appear to be less attractive to Singapore investors who are looking for a place to park their money for the long term.
Singapore Savings Bond – Average yield for August issue
Singapore Savings Bond – Average yield for September issue
You might argue that the 1-year yield of latest September issue looks more attractive at 2.63%, compared to the previous month’s 1-year yield of 2.00%.
However, investors also have more options and are increasingly aware of other places to park their money for short periods of time.
For example, the 6-month T-bill has received more investor interest in the past few months, especially with the attractive return 6-month yield of 2.98% per annum in the last auction on 18 August.
As a result, the non-competitive bids have also increased to S$327 million in 18 August bid from just S$109.5 million in the 23 Jun bid when the cut-off yield was at 2.36% per annum.
What would Beansprout do?
We continue to like the Singapore Savings Bonds as a simple and low-cost way to generate safe returns.
The increase in allotment in the latest auction should be seen as good news for investors who would like to allocate more of their portfolio to the Singapore Savings Bonds.
We also see the SGS bond/T-bill as a sound way to earn a decent yield especially for shorter maturities.
By investing in these two government-backed bonds, we would be able to make our money work harder rather than putting it in a bank.
PSA: The next auction for the 6-month T-bill will be on 1 September, and subscriptions will close at 9pm on 31 August (Wed)!