SSB 10-year average return falls to 2.81%. Still worth applying?

What happened?

Some investors were disappointed when the interest rates on the latest Singapore Savings Bonds (SSBs) were announced today.

The 1-year interest rate on the latest SSB (SBJUN23 GX23060E) is at 2.81% p.a. The average return over 10 years is also 2.81% p.a.

Unlike previous issuances of the SSB where the interest paid increases over time,  you will effectively earn the same average return per year whether you hold this SSB issuance for one year or 10 years. 

Let us dive deeper to see if it might still be worthwhile to apply for the latest issuance of the SSB. 

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

#1 – Interest rates have fallen compared to previous issuance 

The interest rates on the latest SSB have fallen compared to the previous SSB (SBMAY23 GX23050W).

The 1-year interest rate has fallen from 3.03% to 2.81%, while the average 10-year return has fallen from 3.07% to 2.81%. 

We have also seen a decline in the yield of Singapore government bonds and fixed deposit accounts in recent months. 

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.

With the 10-year average return on the SSB falling below the 3% level once again, demand for the SSB could fall further to levels seen in the February and March issuances.  

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

The 1-year interest rate of 2.81% 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 3.75%. 

Check out our cash optimiser tool to compare savings accounts and find out how to earn a higher interest on your savings. 

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

While the 10-year average return on the SSB has fallen to 2.81%, it is still higher than the average 10-year return over the past five years of 1.86%.

What would Beansprout do?

The lower interest rates on the latest SSB reflects the fall in bond yields we have seen in recent 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 and fixed deposits. 

For investors who are interested in the SSB to earn a higher interest over the long term, while having the flexibility to redeem anytime, the SSB is still a decent option. 

This is especially so with the 10-year average return on the SSB still above the average levels we have seen in the last 5 years. 

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

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

Check out our cash optimiser tool to compare savings accounts and find out how to earn a higher interest on your savings. 

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