The higher 10-year average interest rate of 3.32% p.a. for the latest SSB issuance led to a surge in demand.
Singapore Savings Bonds (SSBs) are back in favour again.
The November issuance of SSBs (SBNOV23 GX23110V) were oversubscribed as applications surged.
Applicants who applied for S$47,000 or lower were fully allotted, subject to individual allotment limits.
Applicants who applied for S$47,500 or higher were allotted either S$47,000 or S$47,500. About 74.06% of these applicants were allotted S$47,500.
It seems that apart from putting their savings into T-bills, investors are warming up to SSBs as well.
Here’s what we learnt from the latest SSB allotment results
What we learnt from the SSB allotment results
#1 – Investor demand for SSB rose sharply
There were S$1.2 billion of applications for the November issuance of the SSBs.
This is significantly above the S$140 million of applications for the July issuance of the SSBs, and would represent the highest amount of applications for the SSBs this year.
However, it remains below the amount of applications in the second half of 2022.
Total applications for the SSB reached S$2.4 billion in the August 2022 issuance and S$2.2 billion in the November 2022 issuance.
In fact, the maximum allotment of S$47,500 is still significantly above the levels in the second half of 2022.
At that point in time, the maximum allotment fell to S$9,500 in the August 2022 issuance and S$10,500 in the November 2022 issuance.
#2 – Higher interest rates led to higher demand for SSBs
The increase in applications compared to the previous month is likely due to the higher interest rates in the latest SSB issuance.
The 1-year interest ate 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 chart below).
In fact, the average 10-year return of 3.32% in the October issuance of the SSB would be the highest so far this year.
#3 – Interest rates may rise further in upcoming SSB
Some in the Beansprout community have shared that they can’t wait to find out the interest rate for the December issuance of the SSB as it is likely to be even better than the November issuance.
Indeed, the average 10-year Singapore government bond yield has gone up further in October compared to September as investors anticipate that the US Fed may keep interest rates higher for longer.
The average 10-year SGS bond yield based on the average buying rates of government securities dealers was at 3.40% from 3 October to 27 October 2023.
This is slightly higher than the average 10-year SGS bond yield of 3.33% in the month of September.
As a recap, SSB interest rates are linked to the yields of Singapore Government Securities (SGS). 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), albeit with a one-month lag.
In other words, the average 10-year return on the upcoming SSB issuance would largely correspond to the yield on the 10-year Singapore government bond or SGS in the previous month.
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.
We’ll be looking out for the upcoming SSB issuance which will likely see a higher average 10-year return with the increase in the 10-year government bond yield over the past month.
With higher interest rates, it will also be increasingly likely that investors may not receive their intended allocations of the SSB. Here's how you can build a bond ladder to smooth out interest rate fluctuations.
For those who applied for the November issuance, the issuance will be done by end of day on 1 November.
Learn more about how to apply for the SSB with our comprehensive guide to the SSB.
Discover the projected interest rate for the next Singapore Savings Bond (SSB) issuance.
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