Here’s why it might be worth waiting for the next SSB

What happened?

There has been less discussion about the Singapore Savings Bond (SSB) recently.

We shared earlier that the latest SSB (SBMAR24 GX24030V) offers a 10-year average return of 2.88%.

Compared to the T-bills and fixed deposits, the SSB allows us to lock in the interest rate for an extended duration of up to 10 years, while retaining the flexibility to redeem anytime. 

We have seen a rebound in the cut-off yield in the 6-month Singapore T-bill. The interest rate on the latest SSB is also higher than the return in the previous issuance. 

This led to questions on whether we should subscribe to the current SSB or wait for the next one.

Let us look at the latest SSB interest rate projection to find out. 

Should you apply for SSB now or wait for the next one?

#1 – Current SSB offers 10-year average interest rate of 2.88%

Firstly, let us find out what are the interest rates offered by the latest SSB.

If you hold on to the SSB for 1 year, you will receive an average return of 2.74%.

If you hold on to the SSB for 10 years, you will receive an average return of 2.88% per year.

From the chart below, the 10-year average return of 2.88% is higher than the rate of 2.81% offered by the previous SSB. 

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

#2 – SSB interest rate projected to rise 

As a background, SSB interest rates are linked to the yields of Singapore Government Securities (SGS). If you are familiar with T-bills, SGS are also Singapore government bonds but with 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 rebounded further in February.

The rise in government bond yield came as investors lowered their expectations that the US Federal Reserve will cut interest rates aggressively. 

As of 23 February 2024, the closing yield on the 10-year Singapore government bond yield has rebounded to 3.16%, compared to about 2.9% at the start of the month.

The rebound in the 10-year Singapore government bond yield may mean that the 10-year average return for the next SSB might be higher than the current one.

Based on our SSB interest rate projection as of 25 February 2024, the average return over 10 years for the next SSB may be at 3.05%.

This is calculated using the average of the closing yield of the 10-year government bond so far in February, and assuming that the yield will remain at 3.16% for the remaining working days of the month. 

#3 – Allotment likely to remain high

We have seen a sharp decline in demand for the SSB, with just total applications for the February issuance of the SSB falling to S$183 million from S$868 million in the previous issuance.

All eligible applicants within their individual allotment limits were able to get full allocation for the previous SSB with the fall in demand.

With S$800 million of SSBs offered in the latest issuance, this may mean that investors might also be able to get their full allocation should demand stays the same. 

However, do note that the maximum amount of SSBs an individual can hold is S$200,000. 

What would Beansprout do?

The latest issuance of the SSB offers a 10-year average return of 2.88%, above the return offered by the previous SSB. 

However, the 10-year average return may rise further for the next SSB, as the 10-year Singapore government bond yield has rebounded in February.

As such, we would consider waiting for the next SSB if we are not in a hurry to deploy our capital or lock in the interest rates. 

The actual interest rates for the next SSB may still differ from the current projections, as the Singapore government bond yield may still fluctuate in the remaining days of the month. 

Also, there is no guarantee that we can get our desired allocation next month if demand rises sharply. 

You can continue to check the SSB interest rate projection to find out how the projected interest rate may change in the coming days.  

If you are wondering if it might be worthwhile to swap previous issuances of SSB with the current SSB to earn a potentially higher interest, check out our swap calculator.

If you are looking to earn a higher interest rate in the short term compared to the SSB, then it might be worth considering the upcoming 6-month Singapore T-bill auction.

To find out how the yield on the SSB compare with other assets such as FD and T-bill, check out our Compare Yield Tool. 

Applications for the latest SSB close at 9pm on 26 February (Monday). 

Learn more about SSBs and how to apply for SSBs using our comprehensive SSB guide. 

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