SSB 10-year return rebounds to 2.88%. Worth applying?

What happened?

Investors in the SSB may have some reason to cheer.

The latest SSB (SBMAR 24 GX24030V) offers a 1-year interest rate of 2.74%, and a 10-year average interest rate of 2.88%.

The 10-year average return is higher than the previous SSB, which offered a 10-year return of 2.81%.

This may come as a relief to investors, after we have seen a sharp decline in the cut-off yields in the recent 6-month T-bill auction and 1-year T-bill auction. 

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 higher than previous issuance 

The 1-year interest on the latest SSB has gone up slightly to 2.74% from 2.72% in the previous issuance.

The average 10-year return has also risen to 2.88% from 2.81% in the previous issuance.

The increase in interest rate on the latest SSB reflects the higher Singapore government bond yield in recent weeks, inline with the bounce in US bond yields.

As such, we have seen the 10-year Singapore government bond yield rise to 2.9% one 31 January from 2.74% at the start of the month. 

As a recap, SSB interest rates are linked to the yield of Singapore Government Securities (SGS) like the 10-year Singapore government bond. 

The rise 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 slightly compared to previous issuance

In the previous issuance of the SSB which offered a 10-year average return of 2.81%, total applications plunged to just S$183 million.

This would represent one of the lowest amount of applications for the SSB in the past year.

It would also be significantly lower than the S$1.9 billion of applications in the December issuance of the SSB. 

All eligible applicants within their individual allotment limits were able to get full allocation for the previous SSB.

With increase in interest rate for the latest SSB, demand for the latest SSB may rebound slightly.

In the SSB issuance for March 2023 when the 10-year average return was at 2.9%, there were S$261 million of applications for the SSB.  

In the SSB issuance for August 2023 when the 10-year average return was at 2.99%, there were S$299 million of applications for the SSB.  

This is below the S$900 million of SSBs offered in the latest issuance. 

#3 - Singapore T-bill and fixed deposits offer higher short term rates compared to SSB 1-year return

The cut-off yield for the latest 6-month T-bill auction fell to 3.54%. 

However, it remains significantly above the 1-year interest rate of 2.74% on the latest SSB issuance. 

Likewise, the best 1-year fixed deposit rate of 3.30% is also higher than the 1-year interest rate on the latest SSB. 

Some high-yield accounts offer a higher interest rate compared to the 1-year interest rate on the SSB as well. 

What would Beansprout do?

The slight rebound in the 10-year average return on the SSB should be good news for investors looking to lock in interest rates for the long term.

At the same time, the 10-year average return of 2.88% on the latest SSB remains above the long-term average.

As such, we believe the SSB remains a decent option to consider, especially for investors who would like to have the flexibility to redeem anytime. 

If you are wondering if the interest rate may rebound for the next SSB, you can check out our SSB interest rate projection over the course of the month. This may help you to decide whether to apply for the current SSB or to wait for the next issuance.

To decide if it is worthwhile swapping your existing SSB with the latest SSB issuance, you can check out our swap calculator.

For those who are looking to earn a higher interest rate in the short term, it might be worthwhile considering other products.

For example, the recent cut-off yield on the 6-month T-bill was at 3.54%. 

The best 6-month fixed deposit rate is currently at 3.55%. 

Otherwise, we can also consider high yield savings accounts or cash management accounts which may also offer a higher short-term interest rate compared to the SSB.

Applications for the latest issuance will close on 26th February 2024.  Learn more about how to apply for the SSB with our comprehensive guide to the SSB.

Join the Beansprout Telegram group and Facebook group to get the latest insights on Singapore bonds, stocks, REITs, and ETFs.