SSB 10-year return falls to 3.22% Still worth applying?

What happened?

The interest rates for the latest Singapore Savings Bonds (SSBs) are out. 

The August issuance of the SSB (SBAUG24 GX24080W) offers a 1-year interest rate of 3.19%, and a 10-year average return of 3.22%. 

This is similar to our SSB interest rate projection earlier. 

Let us find out if it the latest SSB is better than the T-bill and fixed deposits, and if it is worthwhile applying for the latest SSB. 

Is it worth applying for the latest Singapore Savings Bonds (SSBs)?

#1 – 1 year and 10 year average interest rate lower than the previous issuance

The 1-year interest rate on the latest SSB has fallen to 3.19% from 3.26% in the previous issuance. 

The 10-year average return has fallen to 3.22% from 3.30% in the previous issuance. 

However, the 10-year average return of 3.22% for the latest SSB would still be above the historical average. 

The decline in the SSB interest rate reflects the higher Singapore government bond yields over the past month.

This is due to higher investor confidence that the Fed will cut interest rates later this year as inflation has eased. 

As a background,  SSB interest rates are linked to the yield of Singapore Government Securities (SGS) like the 10-year Singapore government bond. 

The decline in 10-year average return of the SSB would hence correspond to the higher yield on the 10-year Singapore government bond in the previous month.

#2 – SSB 1-year return inline with fixed deposits

I noticed that the 1-year interest rate of 3.19% is now below the best 1-year fixed deposit rate.

We recently found that the best 1-year fixed deposit rate has been raised to 3.25% p.a. . 

Compared to fixed deposits, the SSB offers us the benefit of having the flexibility to redeem before maturity. 

Some investors may also compare the SSB against the T-bill.

Here, the 1-year interest rate on the latest SSB of 3.19% is below the cut-off yield for the latest 6-month T-bill auction of 3.74%, and the cut-off yield for the latest 1-year T-bill auction of 3.58%.

#3 – Demand may fall with lower yield

We have seen demand for the previous SSB declining with lower interest rates offered.

There were S$1.3 billion of applications for the previous SSB that offered a 10-year average return of 3.3%, compared to S$1.6 billion of applications for the SSB in June that offered a 10-year average return of 3.33%. 

With the latest SSB offering an even lower 10-year average return, demand may fall further. 

The maximum allotment for the previous SSB rose to S$59,500 with the fall in applications.

This may mean that the maximum allotment for the latest SSB may rise above S$59,000 if demand were to fall further. 

What would Beansprout do? 

Despite the fall in interest rates for the latest SSB, they still offer a decent 10-year average return of 3.22%.

In addition, SSBs offer us the flexibility to redeem before maturity. 

However, if you are looking to earn a yield on your idle cash in the short term, then the T-bill and fixed deposit would offer a higher interest rate currently. 

It might be worth noting that there will be an upcoming 1-year Singapore T-bill auction on 25th July 2024.

The other good news is that the allotment for the SSB has improved as demand has fallen. This means that you may be able to get an allotment above S$59,500 if applications were to fall further compared to the previous auction. 

As interest rates have been volatile recently, I will also be monitoring if the interest rate for the next SSB might be higher than the latest SSB. 

You can check out our SSB interest rate projection to help you to decide whether to apply for the current SSB or to wait for the next issuance.

With the 10-year average return on the latest SSB remaining above its historical average, you can also use our SSB swap calculator to decide if it is worthwhile swapping your existing SSB with the latest SSB issuance.

Applications for the SSB will close at 9pm on 26 July

You can sign up for our free email reminder below to make sure you do not miss out on applying for the SSB.

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