SSB 1-year return of 2.97% below fixed deposit and T-bills. Still worth applying?

What happened?

There are fewer investors asking about Singapore Savings Bonds (SSBs) recently, after the interest rates on the SSBs declined in recent months. 

In fact, most of the discussion amongst investors seems to be on the T-bill, after the cut-off yield in the latest 6-month auction jumped to 3.99%. 

The 1-year interest rate on the latest SSB (SBAUG23 GX23080N) is at 2.97% p.a. The average return over 10 years is at 2.99% p.a.

Let us explore further to understand if it is worthwhile applying for the latest issuance of the SSB. 

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

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

The 1-year interest rate on the latest SSB has risen to 2.97% from 2.76% in the previous issuance (SBJUL23 GX23070H)

The average 10-year return has also gone up to 2.99% from 2.82% 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.

The decline in demand was apparent with only S$140 million of applications for S$600 million of SSBs offered. 

As shown in the chart below, SSB applications of S$140 million in the July issuance is the lowest level over the past year. 

Clearly, demand for the SSB has declined sharply with the 1-year and 10-year average return at just around 2.8%. 

#2 – 1-year interest rate lower than Singapore T-bill and fixed deposit accounts

The 1-year interest rate of 2.97% in the latest SSB issuance is lower than the cut-off yield of 3.58% in the latest 1-year Singapore T-bill auction in April. 

According to the MAS, the closing yield on the 1-year T-bill on 17 July 2023 is 3.64%. This is also significantly higher than the first year yield on the latest SSB.

There will also be an upcoming 1-year T-bill auction on 27^th July 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. It is also lower than the best 1-year fixed deposit rate of 3.55%. 

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

While the 10-year average return on the SSB of 2.99% may not look attractive compared to other products in the market currently, it is still higher than the average 10-year return on the SSB of 1.86% over the past five years.

What would Beansprout do?

While the 1-year interest rate on the latest SSB is higher than the previous month, it still remains below 3%. 

For investors who are interested in the SSB to earn a higher interest in the short term, there are other products which currently offer a higher interest rate also worth considering, such as the savings accounts, fixed deposits, and T-bills. 

For investors who are interested to earn a higher interest over the long term (eg 10 years), while having the flexibility to redeem anytime, the SSB remains a decent option. 

After all, the 10-year average return on the SSB is higher than the average levels in the last 5 years. 

If you are keen on the SSB, the application for the latest issuance will close on 26^th July 2023.

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

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