SSB 10-year return bounces to 3.06%. Are T-bills and fixed deposits better?
Bonds
By Gerald Wong, CFA • 04 Apr 2024
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The latest Singapore Savings Bond (SSB) offers a 1-year return of 2.99% and 10-year average return of 3.06%. We find out how it compares against T-bills and fixed deposits.
What happened?
Much of the discussion in the Beansprout community in the past week has been about the cut in interest rate on the UOB One savings account.
However I thought it might also be worth sharing that the latest SSB (SBMAY24 GX24050X) offers a 1-year interest rate of 2.99%, and 10-year average interest rate of 3.06%.
This means that like the Singapore T-bill, the interest rate on the latest SSB has remained elevated.
Let us find out if it is worthwhile applying for the latest SSB.
Is it worth applying for the latest Singapore Savings Bonds (SSBs)?
#1 – 1 year and 10 year interest rate slightly higher than previous issuance
The 1 -year interest rate on the latest SSB has gone up to 2.99% from 2.95% in the previous issuance.
The average 10-year return has also risen to 3.06% from 3.04% in the previous issuance.
The slightly increase in interest rate on the latest SSB reflects the elevated Singapore government bond yield in recent weeks.
This follows an upward trend we have seen for the US government bond yields, due to concerns that inflation may remain stickier than expected.
The 10-year Singapore government bond yield rose to above 3.1% at the end of March, after reaching a low of 2.95% on 11 March.
If you are new to the SSB, SSB interest rates are linked to the yield of Singapore Government Securities (SGS) like the 10-year Singapore government bond.
The slight increase in the 10-year average return of the SSB would hence correspond to the higher yield on the 10-year Singapore government bond in the previous month.
#2 – Demand may rise further compared to the previous issuance
Applications for the SSB rose to S$301 million in the previous SSB issuance which offered a 10-year average return of 3.04%.
This would be slightly higher than the two previous issuances which saw applications fall to below S$200 million.
With S$900 million of SSBs offered, all eligible applicants within their individual allotment limits were able to get full allocation of the previous SSB.
Overall, it would seem like the rise in interest rate on the SSB did not lead to a sharp increase in demand.
With the higher interest rate offered for the latest SSB, demand may increase further.
In the SSB issuance for September 2023 when the 10-year average return was at 3.06%, there were S$523 million of applications for the SSB.
In the SSB issuance for January 2024 when the 10-year average return was at 3.07%, there were S$868 million of applications for the SSB.
This is still below the S$900 million of SSBs offered in the latest issuance.
#3 – Singapore T-bill and fixed deposits offer higher short term rate compared to SSB 1-year return
The cut-off yield for the latest 6-month Singapore T-bill auction rose to 3.8%, above the 1-year interest rate on the latest SSB of 2.99%.
Despite the cut in fixed deposit rates, the best 1-year fixed deposit rate of 3.20% is also higher than the 1-year interest rate on the latest SSB.
You might be wondering if savings accounts may offer a better interest rate compared to the SSB after UOB One’s interest cut.
Based on the revised interest rate from 1 May, the UOB One account will offer an interest of 3.0% p.a. for deposits of up to S$75,000 if you are able to credit your salary and spend on eligible credit cards.
This would be similar to the 1-year interest rate on the SSB.
On the other hand, a no-frills savings account like MariBank would offer an interest rate of 2.88% p.a., below the 1-year interest rate on the SSB.
What would Beansprout do?
With concerns that interest rates are going to be cut, the bounce in the 10-year average return on the SSB to above 3% should be welcomed for investors
Hence, we think the SSB remains a good option to consider if we are looking to lock in interest rates for the long term, while retaining the flexibility to redeem anytime.
However, T-bills and fixed deposits currently offer higher interest rates for investors who are looking to make their money work harder in the short term.
As the Singapore government bond yield has gone up sharply in recent days, it might also be worth monitoring if the interest rate for the next SSB might be higher than the latest SSB.
The 10-year Singapore government bond yield was at 3.23% as at 4 March 2024, higher than the 10-year average return of 3.06% offered by the latest SSB issuance.
You can check out our SSB interest rate projection to help you to decide whether to apply for the current SSB or to wait for the next issuance.
With the 10-year average return on the latest SSB remaining above its historical average, you can also use our SSB swap calculator to decide if it is worthwhile swapping your existing SSB with the latest SSB issuance.
Applications for the latest issuance will close on 25th April 2024. Learn more about how to apply for the SSB with our comprehensive guide to the SSB.
Join the Beansprout Telegram group to get the latest insights on Singapore bonds, stocks, REITs, and ETFs.
Compare the yield of various instruments such as SSB, T-bill and fixed deposits and make your money work harder.
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