SSB allotment rises with lower demand. Here's what else we learnt

What happened?

We saw demand for T-bills declining slightly in the latest auction.

Likewise, applications for the latest issuance of the Singapore Savings Bond (SSB) also fell.

There were S$867.5 million of applications for the latest SSB (SBJAN24 GX24010F). As this was below the S$1.1 billion of SSBs offered, all eligible applicants within their individual allotment limits were able to get full allocation. 

Let’s break it down to understand more about the latest SSB allocation result. 

What we learnt from the latest SSB results

#1 – Investor demand for SSB fell

There were S$868 million of applications for the January issuance of the SSB.

This would represent a sharp fall from the S$1.9 billion of applications for the previous SSB issuance.

However, compared to the September issuance of the SSB which offered a similar 10-year average interest rate of 3.06%, the amount of applications remain elevated. 

There was only S$523 million of applications for the SSB then, lower than the applications in the latest issuance. 

The good news is that with the fall in demand, all eligible applicants within their individual allotment limits were able to get full allocation for the latest SSB.

This is in contrast to the previous issuance where there the allotment limit was at S$20,500, 

#2 – Lower interest rates led to lower demand for SSBs 

The fall in applications is likely due to the lower interest rates in the latest SSB issuance.

The 1-year interest rate on the latest SSB has fallen to 3.0% from 3.30% in the previous auction.

The average 10-year return has also fall to 3.07% from 3.40% in the previous auction.

#3 – Interest rates projected to fall further in the next SSB 

Despite the fall in interest rates compared to the previous auction, the total amount of applications for the SSB remains elevated. 

As we have shared earlier, the total amount of application for the latest SSB was above the level for the September issuance which offered a similar 10-year average return.

This might be because some investors may have chosen to put in a higher application amount in the latest SSB issuance with the expectation that the next SSB may offer a lower return.

Earlier, we noted that Singapore 10-year government bond yield has fallen sharply after the Fed indicated that there might be rate cuts in 2024. 

As SSB interest rates are linked to the yields on the 10-year Singapore government bond yield, this may mean that average 10-year return offered by the next SSB may be lower compared to the latest issuance too. 

Based on our calculations as of 23 December, the projected average 10-year return for the next SSB may fall to 2.83%.

With the latest data available as of 28 December, the projected average 10-year return on the next SSB may fall to 2.82%.

This would be lower than the 10-year average return of 3.07% offered by the latest issuance of the SSB. 

What would Beansprout do? 

We like the Singapore Savings Bonds as a simple and low-cost way to generate safe returns, especially over the long term. 

With the lower interest rate for the latest SSB compared to the previous issuance, it wasn’t a surprise to see a decline in applications for the SSB.

However, it appears that demand for the SSB remains fairly elevated, especially with the interest rate for the next SSB expected to decline further. 

If you would like to continue to monitor the potential interest rate for the next SSB issuance, check out our SSB interest rate projection tool. 

Check out our swap calculator to find out if it may be worthwhile to swap previous issuances of your SSB with the next SSB to earn a potentially higher interest.

For those who applied for the latest issuance, the issuance will be done by end of day on 2 January 2024. 

If you could not get your intended allocation of the SSB and are looking to park your spare cash, find out how you can do so with the Singapore T-bills. best high-yield savings accounts, best fixed deposits, or best cash management accounts.  

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