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Latest SSB allotment of up to S$14,500 per person! Here’s why demand might be falling.

28 Nov 2022

The record high 10-year average interest rate of 3.47% p.a. for the latest SSB issuance did not draw as much subscriptions as the previous month.

SSB allotment Dec

What happened?

It seems that many investors were focused on the T-bill, such that the Singapore Savings Bond has been less talked about these days. 

This is despite the interest rates on the latest SSBs reaching a record high for the December issuance. 

So here’s the latest allotment result for the December issuance of the SSB (SBDEC22 GX22120S).

Applicants who applied for S$14,000 or lower were fully allotted, subject to individual allotment limits. 

Applicants who applied for S$14,500 or higher were allotted either S$14,000 or S$14,500. 

About 39.34% of these applicants were selected at random and allotted S$14,500.

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Source: MAS

 

What we learnt from the SSB allotment results

#1 – Investor interest in SSB has dipped

There was S$1.7 billion of applications for the December issuance of the SSB (SBDEC22 GX22120S).

This was lower than the S$2.2 billion of applications for the November issuance of the SSB (SBNOV22 GX22110A).

In fact, the amount of applications this time was the second lowest in the past five months. It was only in the October issuance that we saw lower applications of just S$1.1 billion. 

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This led to the higher allotments of S$14,500, compared to the previous month’s allotment of S$10,500. 

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#2 – Higher interest rates did not draw more applications for SSBs

The lower subscriptions for the December issuance compared to the November issuance may come as a surprise to some, especially with the record high interest rates for the latest issuance. 

You will receive an interest rate of 3.26% for holding the December SSB for one-year.  If you hold the SSB for 10 years, you will receive an average interest rate of 3.47%. 

SSB interest rates – December 2022 

SSB Dec interest rate

This would be higher than the interest rates in the November issuance. 

You will receive an interest rate of 3.08% for holding the November SSB for one-year.  If you hold the SSB for 10 years, you will receive an average interest rate of 3.21%. 

SSB interest rates – November 2022 

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#3 – Demand moved towards other instruments

Some of the investor interest in the SSB might have moved towards the T-bill. 

This might have happened after the yield on the 6-month T-bill during the auction on 27 October rose to 4.19% per annum. 

Across the two T-bill auctions in November, total bids including competitive and non-competitive bids rose to S$26.1 billion.

This far exceeded the S$21.1 billion of bids submitted across the two auctions in October.

Apart from T-bills, the higher fixed deposit rates offered by various banks may have also drawn some interest away from the T-bill. 

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What would Beansprout do?

The T-bill has drawn a lot of interest in recent months with the yield of the 6-month T-bill at close to 4% per annum. 

However, let’s not forget that the SSB also offers a simple way to generate safe returns. 

More importantly, the SSB allows you to invest for up to 10 years, while allowing flexible redemption such that you can choose to get your money back in any given month. This is something that the T-bill is not able to offer. 

As we shared in our lesson on reinvestment risk, we should also look at the time period of our investment when assessing our options in the market. 

For those who applied for the December issuance, it should be good news that allocation has increased compared to the previous month. The issuance will be done by 1 December 2022. 

If you still can’t decide between the SSB, T-bill and fixed deposit, join our Telegram group and ask one of the shifus in the community!

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