I was back in Malaysia last weekend for a friend’s wedding when I saw the usual news of Singaporeans queuing for 4 hours for something. I thought it was for another McDonald’s Pikachu carrier but no, it was for bank fixed deposits!
Read: 4-hour queues at some S’pore banks as high 2.7% interest rate for fixed deposits draws crowds
Of course, if people queuing must be good right? 😛
I do have some spare cash (our own as well as some of my parent’s reserves) that I’m sitting on waiting for the market to tank further. I’ve shared previously that I don’t think this bear market is over yet, and I’m not sure if it will end anytime soon.
With US CPI coming in hotter than expected and interest rates expected to continue rising further (and maybe even faster), I’m inclined to look at bonds with shorter terms (up to 1 year) so I’ll be able to roll them into higher interest rates once they mature.
I will also have the flexibility to deploy into the stock market eventually if and when I feel stocks are cheap enough or there’s better clarity on the macro side.
For bonds, I’m also not interested in bond ETFs since their prices fall when interest rates rise, and they don’t mature like individuals bonds where you can get back your principal in full.
Besides the usual bank FD, other good and safe options include government bonds like Singapore Savings Bonds (SSB), Treasury Bills (T-bills) and SGS Bonds. Since SGS bonds have longer maturities of 2-50 years, I’ll skip those for now.
Naturally, I’d compare between these options to find the best balance between interest rate, tenure (duration), and minimum investment amount.
Here’s a quick comparison:
| Product | Application / Auction date | Issue date | Product | Yield | Tenure | Min investment | Remarks |
| SSB | 27-Sep-2022 | 3-Oct-2022 | GX22100X | 2.75% | 10 years | $500 | 1y 2.6%; 10y 2.75% |
| T-bill | 15-Sep-2022 | 20-Sep-2022 | BS22118H | 2.76% | 6 months | $1K | Average yield 2.76%, Cut-off yield 3.32% |
| Bank FD | Hong Leong Bank | 2.75% | 12 months | $50K | Other options available – refer to MoneySmart blog (Sep 2022) |
Note that although SSB tenure is 10 years, it is still in consideration because there’s no penalty for early redemption. If interest rates continue to rise, I can just redeem my SSB and apply for the new issuances (assuming can get allotted even, that is).
From my comparison above, I don’t think bank FDs are as attractive as government bonds now especially since yields are increasing as fast as they are.
With the difficulty in getting SSB allotments, I might try for the next 6-month T-bills since yield is higher. I can accept locking in for 6 months.
If inflation shows signs of cooling in coming months though, I might try to secure more SSBs to lock in rates for longer. Interestingly, the 1-year yields for SSB is getting real close to its 10-year average. Not sure if SSB yield will “invert” like the US Treasury 2y-10y bonds.
How are you managing your cash in this rising rate environment?
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