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Why we like the latest Singapore Savings Bonds (SSBs) - August 2022

04 Aug 2022

Missed out on last month's Singapore Savings Bonds (SSBs)? The good news is that the latest SSBs offer you an attractive 1-year interest rate of 2.63%!

Singapore Savings Bond cover

TL;DR

  • Singapore Savings Bonds (SSBs) provide you with a simple and low-cost way to generate safe returns.  
  • The latest Singapore Savings Bonds offer an attractive 1-year interest rate of 2.63%. The average 10-year interest rate of 2.8% remains above the current CPF Ordinary Account (OA) rate of 2.5%. 
  • We see the Singapore Savings Bonds as a good alternative to fixed deposit accounts as they are more flexible and can be redeemed with no penalty. 
  • However, we will not put all our emergency cash into the Singapore Savings Bonds as payments on redemptions will only be made monthly.  

(Updated on 1 August to reflect our views on the latest issue SBSEP22 GX22090Z)

The buzz amongst investors in Singapore in the past month was the record-high interest rates for the Singapore Savings Bonds (SSBs)

Many were naturally disappointed when the the maximum allotment for the August issuance (SBAUG22 GX22080V) was only $9,500.

This shouldn't be a surprise given the surge in interest for the Singapore Savings Bonds. There was a total of S$2.4 billion of subscriptions for the August issuance, close to double that for the July issuance (SBJUL22 GX22070T)

For those of you who did not receive your full allotment, the September issuance (SBSEP22 GX22090Z) will definitely be closely looked at to top up on your allotment shortfall last month.

The good news for the latest issuance is that the bond yields for holding the SSB for shorter durations have increased! You will receive an interest rate of 2.63% for holding the SSB for just one year.

For those of you who have been following the Singapore Government Securities (SGS) bonds, this is inline with the increase in bond yields for the 6-month and 12-month T-bills. 

Read our article unlocking the secrets of the SGS bond if you have not heard about them!

Singapore Savings Bond September interest rate
Source: MAS

The bad news is that the average 10-year  interest rate for the SSB is lower than the last month at 2.8%. This means that you will not get a significant step up in interest rate for holding the SSB for a longer period of time.

That said, the 10-year rate is still higher than what you would be able to earn from your CPF OA currently! 

To us, there is still reason to like the latest Singapore Savings Bonds.

Before we dig deeper, let’s start with a quick recap of what are SSBs in case you are new to this. 

Singapore Savings Bond September 2022

What are Singapore Savings Bonds?

To understand the Singapore Savings Bonds, we have to go way back to 2015.

This was when the first Singapore Savings Bonds were introduced to provide individual investors with a long-term savings option that offers safe returns.

Screenshot-2022-06-03-at-11.29.00-AM.png

Source: MAS

It is also meant to be simple and low-cost. You can just apply for it through your internet banking app! 

Some of the key features of the Singapore Savings Bonds include: 

  • Principal guaranteed. You will get your investment amount back in full. In other words, you will not incur any capital losses. This is an important feature as there are not many investment products that are principal guaranteed! 
  • Flexible redemption. You can choose to get your money back in any given month, with no penalty! Hence, you do not have to decide how long to invest into the Singapore Savings Bonds for from the start. 
  • Long term. You can invest for up to 10 years, allowing you to save for the long term if that is what you prefer.  
  • Step up interest. You will receive interest payments on the Singapore Savings Bonds every six months. The interest paid will increase or “step-up” over time. In other words, the longer your hold on to the Singapore Savings Bonds, the higher average interest rate you will receive. 
  • Small minimum investment amount. You can invest with a minimum amount of $500, and in subsequent multiples of $500. 
  • Monthly issuance. The Singapore Savings Bonds are accessible on a regular basis as they are issued monthly. 

Is Singapore Saving Bond worth buying?

To analyze if the Singapore Saving Bond is worth buying, we compare them to other low-risk products in the market that offer some yield. 

How does the Singapore Savings Bonds compare to Singapore Government Securities?

Screenshot-2022-06-03-at-12.06.48-PM.png

You will earn an interest on the Singapore Savings Bonds that is linked to long-term Singapore Government Securities (SGS) rates.

In which your next question will probably be, why not just invest in the SGS then? After all, the Singapore Government Securities are also backed by the Singapore Government. 

The key difference is that the Singapore Savings Bonds offer more flexibility compared to the Singapore Government Securities. 

The SGS have fixed maturities, which means that you will have to choose how long you want to put your money into the SGS when you are making the purchase. 

While the SGS can be traded in the secondary market, the price you be receive may be lower than what you paid if you decide to sell them before maturity. 

On the other hand, the SSBs can be redeemed in any month with no penalty. You will receive the initial investment amount plus accrued interest upon redemption. 

We really like this feature given the uncertainty over how much interest rates will rise over the next year.  

If interest rates rise, you can have the flexibility of redeeming your SSB and reinvesting your redemption proceeds into the new SSB that offers a better return.

You can do this while collecting any interest that has been accrued during this period. With no redemption fee!

Ok yes, there is a $2 subscription fee charged by the bank. And another $2 redemption fee if you redeem early. Together, this will represent 0.8% of your investment amount if you are putting in $500. But this should be less significant as the investment amount increases.

How does SSBs compare to fixed deposits?

Fixed deposits are usually offered in terms that range from a few months to a three years. 

Based on the current fixed deposit rates that we see currently, Singapore Savings Bonds offer better returns than fixed deposits. 

For example, the best 12-year interest rate offered by Standard Chartered is at 2.3%. The 1-year SSB interest rate is higher at 2.63%. 

There is a minimum deposit requirement of S$25,000 for the Standard Chartered fixed deposit. The minimum investment for the Singapore Savings Bonds is just $500. 

(Do share with us if you find a better fixed deposit rate)

Singapore Savings Bonds are also more flexible than fixed deposits. They can be redeemed (in multiples of $500) in any month with no penalty. Interest earned over the period of investment will also be paid in full.

 

Best interest rate available (p.a.)

Tenure

Minimum deposit amount

Bank of China

2.3%

24 months

S$5,000

CIMB

2.3%

18 months

S$10,000

Citibank

0.1%

6 – 36 months

S$10,000

DBS / POSB

0.85% (new placements)

1.3% (for rollover of existing placements)

8 months and below

18 months

S$1,000

HL Bank

2.08%

24 months

S$10,000

HSBC

2.0%

12 months

S$30,000

ICBC

1.75%

12 months

S$500

Maybank

2.05%

36 months

S$20,000

Standard Chartered

2.30%

12 months

S$25,000

Source: Singsaver As of 1 August 2022

So here’s our verdict on the Singapore Savings Bonds. 

We like the latest issuance of the Singapore Saving Bonds as the interest rate offered is a good alternative to holding cash in a savings account. It is also a good way to diversify from your holdings in fixed deposit and cash management accounts.  

With the uncertain interest rate environment ahead, it also provides flexibility as a place for you to park your money somewhere before deciding to commit to other fixed income assets. 

Is Singapore Savings Bond risk free?

The Singapore government has the strongest credit rating by international credit rating agencies. And the Singapore Savings Bonds are principal guaranteed by the Singapore government. 

While the Singapore Savings Bonds have very low risk, this does not make them entirely risk free. 

As we have seen and heard many times, all investments carry risk.

It’s like you have left your umbrella at home because the weather forecast says there is a very low probability of it raining. But this does not mean it will never ever rain.  

One risk we can think of is liquidity risk. When you decide to redeem your money, you will only receive the payment on the 2ndbusiness day of the following month. 

This is the key reason why we will not put all our emergency cash into the Singapore Savings Bonds. 

While we all hope that we never have to tap on our emergency cash, we will never know for sure when the need to use it will arise. 

And what we will not want to happen, is to have to wait for days or weeks before we are able to receive this cash that we need to use urgently. 

How much should I invest in Singapore Savings Bond? 

There are a few key figures here you’d need to know.  

The minimum amount to invest in the Singapore Savings Bond is $500. 

The maximum amount of Singapore Savings Bond that you can hold is $200,000. 

My personal view is that you should still hold a certain amount of emergency cash in a bank account or a cash management account with higher liquidity. 

This can be three months’ worth of your expenses. Or six months. Or 12. Whatever allows you to sleep soundly at night. 

Money that you know you can immediately tap on without having to wait till the next month to withdraw. 

Then some of the remaining cash on hand can go into SSBs. 

One important thing to note here is that you might not be able to get all the allocation of SSBs in one month’s issuance. 

This is because there are a lot of other Singaporeans who are also very interested to put their money into SSBs. 

In the last issuance (SBAUG22 GX22080V), the maximum allotment to each individual is $9,500. This was despite an increase in the size of the issuance to S$700 million.

While the government has increased the issuance size of the SSBs this time further to $900 million, you will probably have to spread your subscription over many months if you are looking to own a significant amount of SSBs. 

If you are still uncertain about the allotment you will get in this month's issuance, here's a tip - take a look at the Singapore Government Securities (SGS) bonds where interest rates have also gone up. 

Read our article unlocking the secrets of the SGS bond if you have not heard about them!

Singapore Savings Bond Application Date
Source: MAS

Have a question about the Singapore Savings Bond?

Ask us about the Singapore Savings Bonds on our Telegram group.

You can also get bite-sized and enjoyable investment insights on our Instagram.

How do I subscribe to Singapore Savings Bond?

You can apply through DBS/POSB, OCBC and UOB internet banking portals and ATMs, and OCBC’s mobile app.

For Supplementary Retirement Scheme (SRS) subscriptions, you can go through the internet banking portal of your SRS Operator.

Subscribe by 9pm on 26 August! 

Who can apply Individuals, including non-residents. You need to be at least 18 years old to open a CDP account. 
Ways to apply For cash –  DBS/POSB OCBC  or UOB  ATMs or internet banking, and OCBC’s mobile application.For Supplementary Retirement Scheme (SRS)  – internet banking portal of your SRS operator.Note: CPF funds are not eligible for Savings Bond purchases.
Investment amount Minimum of $500, and subsequent multiples of $500. Maximum individual investment limit: $200,000. 
Frequency of issuance A new bond is issued every month. Check out this month’s bond or view the issuance calendar for the year.
Application period Opens at 6pm on the 1st business day of the month. Closes at 9pm on the 4th last business day of the month. Operating hours: 7am to 9pm, Monday to Saturday (excluding Public Holidays). 
Fees $2 non-refundable transaction fee for each application.

Source: MAS

Setting up CDP Account

You will need to have a CDP account to apply for the Singapore Savings Bonds. To open a CDP account, please visit the CDP website here.