SSB 10-year rate at 2.81%. Better than T-bills and fixed deposit?

What happened?

I noticed that the interest rate on the Singapore Savings Bond (SSB) has been going up. 

This month, the 10-year average return offered by the latest issuance of SSB rebounded to 2.81% from 2.56% in the previous issuance.

This follows a similar trend for Singapore T-bills, where the cut-off yield for the latest 6-month T-bill rose to 3.08%. 

This made me wonder if we will see a further increase in the SSB interest rate for the next issuance. If it is expected to rise, I may then consider applying for the next SSB rather than the current one. 

Also, as many in the Beansprout Telegram group has been interested in the best way to earn a higher yield, I will compare the SSB to T-bill and Singapore's best fixed deposits rates to find out if it is worthwhile applying to the SSB. 

Is it worth applying to the SSB? How does it compare to T-bills and fixed deposits?

#1 – Current SSB offers 10-year average interest rate of 2.81%

The good news is that the 10-year average interest rate of the current SSB issuance has rebounded to 2.81%.

If you hold on to the SSB for 10 years, you will receive an average return of 2.81% per year.

If you hold on to the SSB for 1 year, you will receive an average return of 2.66%.

 The 10-year average return of 2.81% is higher than the rate of 2.56% offered by the previous SSB. 

It is also higher than the average interest rate offered by the SSB historically.

#2 - 1-year interest rate lower than T-bill and fixed deposits

The 1-year SSB rate of 2.66% is lower than the latest 6-month T-bill yield of 3.08%, and the 1-year T-bill yield of 2.71%. 

The 1-year SSB rate of 2.66% is also lower than the best 1-year fixed deposit rate of 3.20% p.a.. If you are 55 years and above, you can even get a 1-year fixed deposit rate of 3.30% p.a.

#3 – SSB interest rate projected to rise in the next issuance 

As a background, it might be worth knowing that SSB interest rates are linked to the yields of Singapore Government Securities (SGS). 

Like T-bills, SGS are also bonds issued by the Singapore government. However, they have a longer maturity of 2 years to 30 years. 

The interest rates on the SSB are linked to the daily average SGS yields as published by MAS in the previous month.

As an investor in the SSB, your average annual compounded return over any period (eg 10 years) should broadly correspond to the SGS yield of the same holding period (eg 10 year SGS) with a one-month lag.

In other words, the average 10-year return on the next SSB would largely correspond to the yield on the 10-year Singapore government bond or SGS this month.

As seen in the chart below, the 10-year Singapore government bond yield has been volatile over the past month, but remains higher compared to the average yield in October.

As of 20 Nov 2024, the closing yield on the 10-year Singapore government bond yield was at 2.89%.

Taking the average yield in the month of November, this may mean that the 10-year average return for the next SSB may be slightly higher compared to the current one. 

Based on our SSB interest rate projection as of 21 November 2024, the average return over 10 years for the next SSB may be at 2.88%.

This is calculated using the average of the closing yield of the 10-year government bond so far in November, and assuming that the yield will remain at 2.89% for the remaining working days of the month. 

#4 – Demand for SSB may increase in current issuance

With the higher interest rate offered for the latest SSB, demand may increase compared to the $99.6 million of applications in the previous issuance. 

We can look back at previous SSB issuances where the 10-year average return was around 2.81% to get an indication of the potential allotment for the latest SSB. 

In the SSB issuance for February 2024 when the 10-year average return was at 2.81%, there were S$182.8 million of applications for the SSB. All applicants within the individual allotment limits were able to get full allocation.  

What would Beansprout do?

The latest issuance of the SSB offers a 10-year average return of 2.81%, above the return offered by the previous SSB. 

However, the 1-year SSB rate of 2.66% is still below the Singapore's best 1-year fixed deposit rate and the latest T-bill yield. 

Hence, I would consider the SSB if I am looking to lock in interest rates for a longer period of time, while retaining the flexibility of redeeming my money. 

The 10-year average return on the next SSB is projected to rise slightly, as the 10-year Singapore government bond yield has increased this month compared to October.

If demand for the SSB is the same as a previous issuance when the 10-year rate was close to 2.81%, It is likely that all applicants within the individual allotment limits will be able to get full allocation.  

With the bounce in the SSB return, it might be worthwhile redeeming previous SSBs with lower interest rates and applying for the next SSB once again.

To find out how much more interest you can potentially earning by swapping previous issuances of SSB with the current SSB to earn a potentially higher interest, check out our swap calculator.

Despite the bounce in the 10-year average return in the latest SSB, it still remains below 3%. As such, I will also be looking for other ways to a earn a higher yield on my money, such as through T-bills and fixed deposits. 

Applications for the latest SSB close at 9pm on 26 Nov (Tuesday). Redemptions of SSBs will also close at 9pm on 26 Nov (Tuesday). 

You can learn more about SSBs and how to apply for SSBs using our Guide to Singapore Savings Bonds (SSBs). 

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