The SSB January 2024 issue of Singapore Savings Bonds by the Monetary Authority of Singapore halted its gradual uptrend as returns dipped compared to the previous issues.
In this latest issue of SSB, the 1-year returns come in at 3.0% whereas the 10-year average return is now 3.07%.
Let us compare this month’s interest rates vs. the previous months.
| 10 Year
We can get a guaranteed yield of more than 3% for ten years on our SSBs if we apply and get allocated successfully. To me, this is extremely attractive for a risk-free instrument.
For reference, the December 2023 SSB had a better yield and was oversubscribed by 1.9x times.
On my SSB historical interest rates page, you can see the full history of the Singapore Savings Bonds issues presented in a table format and view the amount of SSBs for each issue that investors have already redeemed.
Singapore Savings Bonds returns reached new highs in December 2022 as the momentum of Fed rate hikes (see below) gathered pace.
Short-term options such as the Fullerton Cash Fund (currently close to 4%) are still an extremely good choice for now, given that the Fed is likely going to keep interest rates high at least until the middle of 2024.
However, the attractive yield will have to come down at some point in time.
I am not waiting to find out and have diverted most of my idle funds into SSBs to pre-emptively lock in a yield of more than 3% for a ten-year duration.
If you are interested in knowing more about Singapore Savings Bonds, check out my articles below.
- Visit the SSB Historical Rates page for data from October 2015 until now
- Learn 37 Things To Become An Expert On Singapore Savings Bonds
- 3 Things About SSBs That Might Interest You
- 1. Recap: What are Singapore Savings Bonds?
- 2. SSB January 2024 Issue Details – SBJAN24 GX24010F
- 3. How Is The Singapore Savings Bonds’ Yield Determined?
- 4. Singapore 10 Years Bond Yield (2023)
- 5. Inverted Yield Curve (2023)
- 6. Consider Redeeming Older SSB Issues With Less Yield For New Ones
- 7. Latest Probabilities Of FOMC Rate Moves
- 8. Higher Short-Term Yield Vs Locking-In 10 Years Returns
- 9. How To Apply For SSBs Via Internet Banking (DBS/POSB)
- Invest Or Skip This SSB Issue?
1. Recap: What are Singapore Savings Bonds?
Singapore Savings Bonds are safe and flexible bonds for individual investors that allow us to enjoy returns that increase over time and redeem in any month without penalty.
Singapore Savings Bonds are a special type of Singapore Government Securities (SGS) with these features that make them suitable for individual investors:
- Safe → Savings Bonds are backed by the Singapore Government, and they can always be redeemed for the amount invested with no capital losses.
- Long-term → You can invest for up to 10 years and earn interest that increases over time. The longer you hold your bond, the higher your return.
- Flexible → You don’t have to decide at the start how long you want to hold your Savings Bonds. You can get your funds back within a month with no penalty.
- No capital losses → SSBs are non-tradable securities that protect individuals from capital losses.
2. SSB January 2024 Issue Details – SBJAN24 GX24010F
Here are the details on the latest issue of SSB January 2024.
- Amount Offered – S$1.1 billion
- Interest Payment Months – January and July
- Opening Date – 01 Dec 2023 at 6:00 pm (First business day)
- Closing Date – 26 Dec 2023 at 9:00 pm (Fourth last business day)
- Allotment Date – 27 Dec 2023 after 3:00 pm (Third last business day)
- Issue Date – 02 Jan 2024
- Maturity Date – 01 Jan 2034
Yearly interest rates for the January 2024 SSB can be seen here.
Compared to the projections by I Love SSB, the actual SSB rates were fairly accurate.
3. How Is The Singapore Savings Bonds’ Yield Determined?
Singapore Savings Bonds offer a return that corresponds with how long we hold them.
- 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 the rates are determined. I found the authoritative answer, but I’m not good enough at Maths to understand everything in it.
If you are into the Maths behind SSBs, the official documentation is the authoritative source (MAS) to learn how the Savings Bond’s tenor’s coupon rate for each year is determined. Refer to the formula below.
We need to understand these two things if you are an average Joe like me.
- If you hold your savings bond for the full ten years, your return will match the average 10-year SGS yield the month before you bought the bond. See the next section to learn more. In case you’re wondering, the 10-year SGS yield has hovered between 2% and 3% for most of the past decade.
- The interest rates may be adjusted to maintain the “step-up” feature if market conditions do not allow it – which is our current situation (inverted yield curve).
4. Singapore 10 Years Bond Yield (2023)
As I have mentioned in the previous section, by holding our Singapore Savings Bonds for the full ten years, our returns will match the average 10-year SGS yield the month before we bought the bond.
Below, I have referenced the Singapore 10-year bond Yield chart below, and you can see how SSB returns have practically mirrored it.
5. Inverted Yield Curve (2023)
It is essential 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 carries greater risk.
An inverted yield curve occurs when yields on shorter-dated Treasuries rise above those for longer-term ones.
What we are experiencing right now, whereby short-term bonds are yielding higher than long-term ones, is an anomaly.
Historically, an inverted yield curve is often seen as an indicator of a pending recession.
The official SSB documentation states the following.
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.
The reasoning is that the whole intent of Savings Bonds is to encourage long-term savings.
As a result,
- This 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.
- 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).
6. Consider Redeeming Older SSB Issues With Less Yield For New Ones
Don’t forget that you can always recycle your older and lower-yielding tranches for SSBs for newer ones if you happen to be still holding on to less attractive ones.
You can check out all the outstanding (vs. redeemed) SSBs on this MAS webpage.
If you ask me, I think most Singapore Savings Bonds issued in October 2022 (first-year interest of 2.6%) or earlier should be redeemed.
We can then use the funds from the redeemed SSBs to apply for the latest issue of SSBs for higher returns.
You can see the full historical interest rates of SSBs here.
7. Latest Probabilities Of FOMC Rate Moves
The CME Group FedWatch Tool calculates probabilities of a rate hike by looking at the prices of federal funds futures contracts traded on the Chicago Mercantile Exchange.
These contracts allow people to bet on or protect themselves against changes in the federal funds rate.
This tool collects data on the prices of these contracts and uses that information to estimate the chances of a rate hike.
It calculates the implied probabilities based on how traders are pricing these contracts.
The probabilities as of today can be seen in the table above.
I have included snapshots of previous months so that you can easily compare them.
This potentially gives us an idea of how long the short-term yield will continue to stay high.
8. Higher Short-Term Yield Vs Locking-In 10 Years Returns
Combining what we have learned above, we have a rough idea of where SSB returns are headed compared to short-term cash yield.
Singapore Savings Bonds could be a great option if you want to lock in attractive rates for your emergency funds due to their long-term certainty.
However, if you hope to benefit from the high yield in the short term or adopt a wait-and-see approach, you can consider putting your funds into Fullerton SGD Cash Fund as its underlying instrument.
Cash fund is an extremely strict class of investment products that are regulated under the MAS Code on Collective Investment Schemes which states that there are explicit requirements that the names should be appropriate, not undesirable and not misleading.
Cash funds invest primarily in fixed deposits, and they are considered the lowest risk of any investment fund.
To be extra specific, there is a potential loss risk of 0.01% or less in the case of a maximum drawdown.
Fullerton SGD Cash Fund is currently giving a 5-day moving average return of close to 4% p.a.
This 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.
If you are thinking of investing in the Fullerton Cash Fund, it can be purchased via robo advisors such as Endowus (same low fees as MoneyOwl) or online brokerages such as WeBull (free stocks) or Tiger (S$120 cash).
9. How To Apply For SSBs Via Internet Banking (DBS/POSB)
Applying for Singapore Savings Bonds is effortless and will only take a minute of your time via internet banking.
Below are screenshots of my application process via the POSB website.
Once in a while, I have always experienced a weird bug when trying to do this using the Chrome browser because the Apply button would be missing, but I had no issue when using Firefox.
If you are in the same situation as me, you may wish to disable any ad-blockers because it may interfere with the website.
I thought it might be helpful to point out this issue in case you are encountering the same problem as I did.
Invest Or Skip This SSB Issue?
To recap, you can expect to receive guaranteed returns of more than 3% for ten years with a virtually risk-free investment option.
I haven’t decided if I would be applying for another $10,000 in this issue of SSB. if I did, it would be because I am swapping out an older issue of SSB that has a lower yield. I will not be putting in any fresh funds anymore.
Will you be deploying any of your money into the latest issue of Singapore Savings Bonds?
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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 his daily expenses and vacations. You can learn more about Kevin here.