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Singapore Savings Bonds (SSBs) interest rates fall further. Still worth buying? [Feb 2023]

01 Feb 2023

Discover the benefits of investing in Singapore Savings Bonds (SSBs). Get a secure and reliable return on your savings with low-risk investment options.

SSB Feb 2023

TL;DR

  • Singapore Savings Bonds (SSBs) provide you with a simple and low-cost way to generate safe returns.  
  • Some investors may be disappointed that the 1-year interest rate for latest Singapore Savings Bonds has declined to 2.76% from 2.84% last month. The average 10-year interest rate for the latest Singapore Savings Bond also fell to 2.90% p.a. 
  • Despite the fall in interest rates, we think the SSBs still offer an attractive option to lock in long-term interest rates while offering flexibility of redeeming with no penalty. 
  • If you are looking to park your money for the short term, then T-bills and fixed deposit accounts might also be a good alternative. 

(Updated on 1 February to reflect our views on the latest issue SBMAR23 GX23030A)

It seems that fewer investors are interested in the Singapore Savings Bonds (SSBs) these days. 

In the previous issuance in February, there was no quantity celling allotted to each investors as compared to S$173,000 in January issuance. 

For those awaiting the latest February issuance (SBMAR23 GX23030A), you may be disappointed to notice that the average interest rates has declined compare to previous issuance when you hold the SSB for either short term or long term.

You will receive an interest rate of 2.76% per annum for holding the Mar 2023 SSB for one-year. This is lower than the 2.84% interest rate for the previous issuance.

If you hold the SSB for 10 years, you will receive an average interest rate of 2.90% per annum. This is also lower compared to last month's average 10-year interest rate of 2.97% annum.

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

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.

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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 do Singapore Savings Bonds compare to SGS Bonds and T-Bills?

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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 do SSBs compare to fixed deposits?

With the decline in interest rates in the latest SSB, some fixed deposit rates might appear to be more attractive. 

For example, the best 12-month interest rate offered is at about 4%. 

However, do note that fixed deposits do not allow you to lock in interest rates for 10 years, as they are usually offered in terms that range from a few months to a three years.

There is also a higher minimum deposit requirement for fixed deposit. The minimum investment for the Singapore Savings Bonds is just $500. 

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.

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

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

We still like the Singapore Saving Bonds as it allows us to lock-in interest rates for longer maturities. 

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. 

However, if you are looking at a place to park your money for the short term, then the T-bill and fixed deposit accounts could also be a good alternative.

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. 

Have a question about the Singapore Savings Bond?

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

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 22 February! 

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.

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