SSB 10-year return jumps to 3.4%. Worth buying compared to T-bills?

What happened?

Investors in the Beansprout community were excited to see the interest rate on the latest Singapore Savings Bonds (SSBs) rise further.

The latest SSB (SBDEC23 GX23120Z) offers a 1-year interest rate of 3.30%, and a 10-year average interest rate of 3.40%.

This would make the 10-year average interest rate on the latest SSB the highest so far in 2023. 

Let us find out if it is worthwhile applying for the latest SSB, and how it compares to T-bills and fixed deposits. 

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

#1 – 1 year and 10 year interest rate higher than the previous issuance

The 1-year interest rate on the latest SSB has risen to 3.30% from 3.21% in the previous issuance (SBNOV23 GX23110V).

The average 10-year return has also gone up to 3.40% from 3.32% in the previous issuance, which is shown in the chart below. 

The increase in interest rate on the latest SSB reflects the higher Singapore government bond yield in the past month, as US bond yields have climbed higher.

For example, the average 10-year SGS bond yield based on the average buying rates of government securities dealers was at 3.40% in October.  

This is slightly higher than the average 10-year SGS bond yield of 3.33% in September. 

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

The move-up 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 – Maximum allotment for SSB likely lower than previous issuance 

In the previous issuance of the SSB with a decent 10-year average interest rate of 3.32%, total applications surged to S$1.2 billion.

This was significantly higher than the S$688 million of application in the October issuance of the SSB.

As the total amount of applications exceeded the SSBs issued, the maximum allocation for the SSB was at S$47,500.

This was the first time since the April issuance that the SSB has been oversubscribed.  

With the higher interest rate in the latest SSB compared to the previous one, demand for the latest SSB may rise even further. 

In fact, the last time when the 10-year average interest rate reached above 3.40% was in the December 2022 issuance. 

There were S$1.7 billion of applications then, which led to a maximum allocation of just S$14,500.

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

One of the questions we have been getting is whether it is more worthwhile to apply for the SSB or T-bill.

Recently, we have seen an increase in the cut-off yield on the 6-month T-bill to 3.95%. 

The cut-off yield on the 1-year T-bill also remains elevated at 3.7%. 

For investors who are looking at locking in interest rates for a short period of time, the T-bill offers a higher interest rate compared to the latest SSB. 

Likewise, the best 1-year fixed deposit rate of 3.60% is also higher than the 1-year interest rate on the latest SSB. 

In fact, some savings accounts offer a higher interest rate compared to the 1-year interest rate on the SSB as well.

What would Beansprout do?

If you are wondering if the latest SSB is better than the T-bill, we would say that it depends on your time horizon.

We like the latest SSB as it offers a 10-year average interest rate of 3.40%, one of the highest historically. 

The SSB allows us to lock in a high interest rate for an extended duration of up to 10 years, while retaining the flexibility to redeem anytime. This is not something we are able to do with the T-bill, which matures in 6-months or 12 months. 

If you are deciding whether to apply for the current SSB or to wait for the next issuance, you can check out our SSB interest rate projection here.

With the increased demand for the SSB, you may not be able to get your intended allotment for the latest SSB.

As such, we can build a bond ladder to earn a passive income while reducing exposure to interest rate fluctuations.

However, if we are looking to earn a higher interest rate in the short term, then we would consider other products.

For example, the recent cut-off yield on the 6-month T-bill of 3.95% is higher than the SSB 1-year return of 3.3%. If you are interested in the T-bill, there will be upcoming 6-month T-bill auctions on 8^th November and 23^rd November. 

Some high yield savings accounts or cash management accounts may also offer a higher short-term interest rate compared to the SSB.

Applications for the latest issuance will close on 27^th November 2023.  Learn more about how to apply for the SSB with our comprehensive guide to the SSB.

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