SSB 1-year return falls to 2.76%. Fixed deposit and T-bills offer better yield?

What happened?

There wasn't much excitement when the interest rates on the latest Singapore Savings Bonds (SSBs) were announced.

The 1-year interest rate on the latest SSB (SBJUL23 GX23070H) is at 2.76% p.a. The average return over 10 years is at 2.82% p.a.

This led some investors to wonder if the days of being able to earn more than 3% interest on the SSB are over, and if there are better alternatives to earn a high yield. 

Let us take a further look to see if it is still 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 lower than previous issuance 

The 1-year interest rate on the latest SSB has fallen to 2.76% from 2.81% in the previous issuance (SBJUN23 GX23060E).

The average 10-year return has risen slightly to 2.82% from 2.81% in the previous issuance (shown in chart below). This is because of the higher interest rate paid on years 8 to 10 of the SSB. 

In the previous issuance of the SSB, all applicants within the individual allotment limits were able to get full allocation, as demand for the SSB fell.

In fact, the total amount of SSB applications of S$219 million in the June issuance is the lowest level over the past year. Clearly, demand for the SSB has declined sharply as the interest rate falls to below 3%. 

#2 – 1-year interest rate lower than T-bill and savings accounts

The 1-year interest rate of 2.76% is significantly lower than the cut-off yield of 3.58% in the latest 1-year Singapore T-bill auction in April. 

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 2.82% may not look attractive compared to other products in the market currently, it is still higher than the average 10-year return over the past five years of 1.86%.

What would Beansprout do?

The lower 1-year interest rate on the latest SSB reflects the fall in bond yields we have seen in previous months. 

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. 

To find out how to earn a higher interest on your savings, check out our cash optimiser tool 

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 still 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 June 2023.

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

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