SSB 10-year return at 3.3%. Apply now or wait for the next SSB?

What happened?

Towards the end of the month, discussion on Singapore Savings Bonds (SSBs) will tend to pick up.

Many investors in the Beansprout community often ask us if the projected interest rate for next month’s SSB will remain high.

After all, the current issuance of the SSB offers a 10-year average interest rate of 3.30%, close to the historical highs. 

Knowing what the projected SSB interest rate is may then allow us to decide if we should apply for the current SSB or wait for the next one. 

As such, I decided to take a look at the latest SSB interest rate projection to see if the interest rate may stay high for the next SSB. 

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

#1 – Current SSB offers 10-year average interest rate of 3.30%

The current issuance of the SSB offers a fairly high interest rate.

If you hold on to the SSB for 1 year, you will receive an average return of 3.26%.

If you hold on to the SSB for 10 years, you will receive an average return of 3.30% per year.

The 10-year average return of 3.30% is steady from the rate of 3.33% 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 fall to about 3.21%

If you are new to the SSB, what you would need to know is 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 fallen in the month of June.

This is due to easing inflation in the US, which has led to rising investor confidence that the Fed may cut interest rates soon. 

As of 21 June 2024, the closing yield on the 10-year Singapore government bond yield was at 3.16%.

This is below the 10-year average return offered by the current SSB. 

Taking the average yield in the month of June, this may mean that the 10-year average return for the next SSB may be lower than the current one.

Based on our SSB interest rate projection as of 25 May 2024, the average return over 10 years for the next SSB may be at 3.21%.

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

#3 – Demand for SSB likely to remain high

With the higher interest rate offered by the recent SSBs, demand has increased in the June issuance of the SSB.

There were S$1.6 billion of applications for the SSB in the previous issuance which offered a 10-year average return of 3.33%.

As this exceeded the S$1.0 billion of SSBs issued, eligible applicants were allocated up to S$24,500 of SSBs. 

With a higher issuance size of S$1.1 billion for the current SSB, investors may get a slightly higher allotment if demand for the SSBs remain the same as the previous issuance. 

What would Beansprout do? 

The latest issuance of the SSB offers a 10-year average return of 3.30%, close to the return offered by the previous SSB. 

However, the 10-year average return on the next SSB is projected to fall to about 3.2%, as the 10-year Singapore government bond yield has declined in June.

As such, it might be more worthwhile to apply for the current SSB rather than to wait for the next one. 

From what we see in the previous SSB issuance, the allotment limit may be close to S$24,500 if demand for the SSBs do not spike up significantly. 

If we are worried about not getting our targeted allotment, we can also build a bond ladder to smooth out the interest earned on the SSB over time.

Despite the lower projected interest rate for the SSB, the returns are still higher than the historical average. 

Hence, it might also be worthwhile swapping previous issuances of SSB with the upcoming SSB to earn a potentially higher interest. To find out how much more interest you can potentially earning by doing so, check out our SSB 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 6-month Singapore T-bill, which has a cut-off yield of 3.74% in the latest 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 25 June (Tuesday). Redemptions of SSBs will also close at 9pm on 25 June (Tuesday).

You can receive a email reminder if you are afraid of missing out on the application deadline.

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

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