SSB 10-year return falls further to 2.81%. Still worth buying?

What happened?

Investors in the SSB may be disappointed by the interest rate offered by the latest issuance. 

The latest SSB (SBFEB24 GX24020T) offers a 1-year interest rate of 2.72%, and a 10-year average interest rate of 2.81%.

The 10-year average return is lower than the previous SSB, which offered a 10-year return of 3.07%.

Compared to the recent peak of 3.40%, the 10-year return on the SSB has fallen fairly significantly.

Let us find out if it still worthwhile to apply for the latest SSB.

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

#1 – 1 year and 10 year interest rate lower than previous issuance

The 1-year interest on the latest SSB has fallen to 2.72% from 3.00% in the previous issuance.

The average 10-year return has also fallen to 2.81% from 3.07% in the previous issuance. 

The fall in interest rate on the latest SSB reflects the lower Singapore government bond yield in the past month, as US bond yields have fallen sharply. 

For example, the 10-year Singapore government bond yield has fallen to 2.71% on 29 December 2023 from 2.97% at the start of the month. 

If you are new to the SSB, it might be worthwhile knowing that SSB interest rates are linked to the yield of Singapore Government Securities (SGS) like the 10-year Singapore government bond. 

The decline in the 10-year average return of the SSB would hence correspond to the lower yield on the 10-year Singapore government bond in the previous month.

#2 – Demand may fall further compared to previous issuance

In the previous issuance of the SSB which offered a 10-year average return of 3.0%, total applications fell to below S$900 million

This was 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 the further decline in interest rate for the latest SSB, demand for the latest SSB may fall further.

In the SSB issuance for June 2023 when the 10-year average return was similarly at 2.81%, there was just S$219 million of applications for the SSB.

Likewise in the July 2023 issuance of the SSB where the 10-year average return was at 2.82%, there was just S$140 million of applications.

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

With the fall in interest rates for the latest SSB issuance, you might be wondering if it is the SSB is still worth considering compared to the T-bill and fixed deposit. 

The closing yield on the Singapore 6-month T-bill remains fairly elevated at above 3.77% as of 29 December 2023. 

Hence, the T-bill offers a higher interest rate compared to the latest SSB for investors who are looking at making their savings work harder in the short-term. 

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 SSB remains a decent option to consider if you are looking to lock in a high interest rate while having the flexibility to redeem anytime.

After all, the 10-year average return of 2.81% remains above its historical average, even as it has fallen from recent highs. 

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 3.73%. The best 6-month fixed deposit rate is  currently at 3.65%. 

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 January 2024.  Learn more about how to apply for the SSB with our comprehensive guide to the SSB.

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