SSB 10-year return rises to 3.32%, highest in 2023. Is it worth applying?

What happened?

Some investors would be happy to hear that interest rates on the T-bill and SSB have been going up. Earlier, we saw the cut-off yield on the 6-month Singapore T-bill jump to 4.07%, representing the highest level since January this year.

The latest SSB (SBNOV23 GX23110V) offers a 1-year interest rate of 3.21%, and a 10-year average interest rate of 3.32%.

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

Let us dive deeper into the latest issuance of the SSB to understand how the interest rates offered compare to T-bills and fixed deposits, and if it worthwhile applying for the latest SSB.

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

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

The 1-year interest rate on the latest SSB has risen to 3.21% from 3.05% in the previous issuance (SBOCT23 GX23100T).

The average 10-year return has also gone up to 3.32% from 3.16% in the previous issuance (shown in the chart below). 

This follows a significant jump in the US government bond yields and Singapore government bond yields in recent weeks.

We saw the 10-year Singapore government bond yield move up to as high as 3.45% in September from around 3.0% at the start of August this year, after the US Fed indicated that interest rates may stay higher for longer. 

Earlier, we shared that 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 – Issuance size increased to S$1 billion

For investors who are worried that they might get a very small allotment for the latest SSB, we wanted to highlight that the size of the current issuance has been increased to S$1 billion from S$800 million in the previous issuance. 

This could help investors to be allocated more SSBs, even if demand were to rise with the increase in interest rates offered.

In the previous issuance of the SSB where we already saw interest rates of above 3%, all applicants within the individual allotment limits were able to get full allocation, as there were only $688 million of applications for the S$700 million of SSBs offered. 

As shown in the chart below, total SSB applications of S$688 million in the October issuance was slightly above the previous month's applications, but remains significantly below the recent peak of S$2.2 billion in November 2022. 

If the applications were to rise to levels we saw in November and December last year, then investors may only get partial allocation of the SSBs once again. 

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

The 1-year interest rate of 3.21% in the latest SSB issuance is lower than the cut-off yield of 3.74% in the 1-year Singapore T-bill auction in July. 

It is also below the cut-off yield of 4.07% in the 6-month Singapore T-bill auction on 28 September 2023. 

However, SSBs offer more flexibility compared to the T-bill, as it is capital protected and can be redeemed anytime.

The 1-year interest rate of 3.21% is lower than the best 1-year fixed deposit rate of 3.60%, as well as the effective interest rate on some savings accounts. 

What would Beansprout do?

With a 10-year average return of 3.32%, the latest SSB offers one of the highest 10-year average return historically. 

Hence, we would definitely consider the latest SSB if we want to lock in higher returns for a longer period of time, while retaining the flexibility to redeem anytime. 

We would also consider building a bond ladder if we are worried that we would not get full allocation to the latest SSBs, so as to be able 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 might also consider other products with a higher than interest than the SSB. 

Apart from the best 12-month fixed deposit account which offers an interest rate of 3.60%, there are also high-yield savings accounts that offer fairly attractive interest rates. 

Also, there will be a one-year T-bill auction coming up this month on 19 October. 

Applications for the latest issuance will close on 26^th October 2023. Learn more about how to apply for the SSB with our comprehensive guide to the SSB.