SSB return jumps above 3%. Better than fixed deposit and T-bills?

What happened?

With all the attention on T-bills, fixed deposit accounts and savings accounts, you might have missed out on the latest interest rates offered by the SSB.

Here's the good news - the interest rates on the latest SSB (SBSEP23 GX23090F) have gone up, with the 1-year interest rate at 3.01% p.a., and the average return over 10 years at 3.06% p.a.

Let us examine if it might be worthwhile applying for the latest issuance of the SSB. 

Is it worth applying to the latest Singapore Savings Bonds (SSBs)?

#1 – 1-year and 10-year interest rate higher than previous issuance 

The 1-year interest rate on the latest SSB has risen to 3.01% from 2.97% in the previous issuance (SBJUL23 GX23070H)

The average 10-year return has also gone up to 3.06% from 2.99% in the previous issuance (shown in chart below). 

In the previous issuance of the SSB, all applicants within the individual allotment limits were able to get full allocation, as there were only S$299 million of applications for S$600 million of SSBs offered. 

As shown in the chart below, total SSB applications of S$299 million in the August issuance is slightly above the previous month's applications, but remains significantly below the recent peak of S$2.2 billion in November 2022. 

#2 – Singapore T-bill and fixed deposit accounts offer higher interest rate than SSB 1-year return

The 1-year interest rate of 3.01% in the latest SSB issuance is lower than the cut-off yield of 3.74% in the latest 1-year Singapore T-bill auction in July, and the closing yield on the 1-year T-bill of 3.71% on 2 August 2023. 

However, the SSB offers more flexibility compared to the T-bill, as it is capital protected and can be redeemed anytime.

The 1-year interest rate is below the effective interest rate on some savings accounts. For example, the GXS savings account is offering an interest rate of 3.48%, while CIMB is offering new customers an interest rate of 3.5% for six months on the FastSaver account. 

The 1-year interest rate of 3.01% is also lower than the best 1-year fixed deposit rate of 3.45%. 

#3 – 10-year average return still higher than historical average

It is worth noting the the 10-year average return on the SSB of 3.06%  is higher than the average 10-year return on the SSB of 1.86% over the past five years.

What would Beansprout do?

Many investors would be happy to see that the 1-year interest rate on the latest SSB has gone up compared to the previous month. 

However, if you are interested to earn a higher interest in the short term, there are other products which currently offer a higher interest rate also worth considering.

For example, you can earn an interest rate of around 3.5% p.a. without having to jump through hoops on some savings accounts. 

Some banks have also recently raised their fixed deposit interest rates, and you can earn an interest rate of 3.45% p.a. with a 12-month fixed deposit.

Lastly, the latest 6-month Singapore T-bill offered a cut-off yield of 3.85%. 

For investors who are interested to earn a higher interest over a long period of time (say 10 years), while having the flexibility to redeem anytime, the SSB remains an attractive option as the 10-year average return on the SSB is higher than the average levels in the last 5 years. 

Applications for the latest issuance will close on 28^th August 2023. Learn more about how to apply for the SSB with our comprehensive guide to the SSB.

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