Singapore Savings Bonds (SSB) July-2023 Rates: Year 1 (2.76%), 10-Year Avg (2.82%)

The July 2023 tranche of Singapore Savings Bonds didn’t bring any surprise as returns has remained close to the previous tranche.

While I have selectively bought specific tranches in the past, I think I have more than enough allocation as of right now so I’m once again staying put. No actions on my part.

Singapore Savings Bonds returns have already reached new highs in previous months as the momentum of Fed rate hikes continued to gather pace. The pivot seemed to have arrived but a hot economy and jobs report flamed the likelihood of YET another rate hike in on June 14, 2023.

If you’re happy with returns of ~2.8% for what is virtually a risk-free instrument, you would be delighted with SSB.

Ultimate Resource → Read These 37 Things To Become An Expert On Singapore Savings Bonds

For the Singapore Savings Bonds (SSBs) historical rates from October 2015 until July 2023, please head over to my page (SSB Historical Rates) for more details.

Here are the latest details.

July 2023 SSB Tranche – SBJUL23 GX23070H

• Amount offered : S$600 million
• Interest payment months : July and December (your first payout is Jan 2024)
• Opening date : 01 June 2023, 6pm // first business day
• Closing date : 26 June 2023, 9pm // fourth last business day
• Allotment date : 27 June 2023, after 3pm // third last business day
• Issue date : 01 July 2023
• Maturity date : 01 July 2033

Yearly interest rates can be seen below below –

You can redeem older tranches for SSBs for newer ones

Don’t forget that you can always recycle your older and lower-yielding tranches for SSBs for newer ones if you happen to still be holding on to less attractive ones.

Do you know how is the Savings Bonds yield determined?

Savings Bonds offer a return that corresponds with how long we hold them for.

By design, we receive less interest at the start but the amount “steps up” or increases over time.

The longer we hold our Savings Bonds, the higher our effective return is.

The interest rates of each Savings Bond issue are based on the average Singapore Government Securities (SGS) yields the month before applications for that issue open.

People have often wondered how there rates are determined. Well, I found the answer but I’m not great enough at Maths to understand everything in it.

If you are into the Maths behind SSBs, the official documentation is the authoritative source to learn how the coupon rate for each year of the Savings Bond’s tenor is determined – see formula below.

Note that interest rates may be adjusted to maintain the “step-up” feature if market conditions do not allow it – which is the situation we’re facing right now.

It is important to understand that all else being equal, a bond with a longer maturity will usually pay a higher interest rate than a shorter-term bond, since longer-term debt carry greater risk.

Inverted Yield Curve

An inverted yield curve occurs when yields on shorter-dated Treasuries rise above those for longer-term ones.

What we’re experiencing right now, whereby short-term bonds are yielding higher than long-term ones, is an anomaly i.e. an inverted yield curve.

FYI – Historically, an inverted yield curve is seen as an indicator of a pending recession!

As stated in the official documentation – “there may be certain occasions where the reference SGS yields do not allow a particular Savings Bond issue to have a monotonically increasing step-up interest feature.”

When this happens, MAS shall lower the coupon rates by the minimum amount necessary, to maintain a weakly monotonically increasing step-up coupon schedule.

That’s why we see short term (e.g. cash fund like MoneyOwl WiseSaver) yield upwards of 4% but Singapore Savings Bonds 1-year return is lower.

The reasoning is that the whole intent of Savings Bonds is to encourage long-term savings.

As a result, these adjustments may cause the average annual compounded return on the particular Savings Bond issue over one, two or five years to be less than the one, two and five-year reference yields.

However, the adjustments will not affect the issue’s return if held to maturity, which shall always equal the ten-year reference yield (subject to slight differences of up to +/- 0.03% due to rounding in the computation of the step-up coupons).

If this piece of information was helpful to you, don’t forget to check out my blog post that will get you up to speed with 37 important things on Savings Bonds.

What to do? Wait and see?

If you’re still expecting the rates to go up in future (I think it is very unlikely) or simply adopting a wait-and-see approach, you can consider putting your funds into MoneyOwl’s WiseSaver (read my review here).

WiseSaver is currently giving a 5-day moving average returns of about 4% p.a. which is higher than the first year return of the Singapore Savings bonds, which means your idle funds can continue working hard for you while you wait.

I have idle funds sitting inside MoneyOwl WiseSaver for quite a few months and the approx. 4% p.a. returns have been very attractive.

For now, the market seems to think that interest rate will contain to remain elevated throughout the entire 2023.

In light of the current economic environment, fixed income bond funds has come back into the limelight after what some call “historic losses” in 2022.

With seemingly far better valuations, some are banking on them for both capital appreciation with attractive yields – a perfect combo. (or storm?)

Meanwhile, Syfe has launched their newest Income+ Portfolio last month.

I penned down my thoughts in a Syfe Income+ blog post that talks about why I wouldn’t invest in it. Do check it out if you have a few minutes to spare.

Subscribe → Giveaways | Free Downloads
Free Rewards → Cash | Stocks | Vouchers

Kevin

Kevin started Turtle Investor when his net worth languished at negative $25,755. His desire to turn things around led him to build passive income from investments and side hustles that pay for all his daily expenses and overseas vacations. You can learn more about Kevin here.