Bonds Singapore Market

Singapore Savings Bond (SSB) Aug 2023 – Yield Might Increase Further Next Month But Likely To Peak Soon

Calvin Lo

The latest SSB for August 2023 has a 10-year average yield of 2.99%, substantially higher than last month’s SSB offering 2.82%. The first year yield is 2.97%, and subsequently the yield remains relatively flat but it increases the last few years prior to maturity. This month, there’s $600m on offer. If you’re interested, remember to apply by next Wednesday 26 July, 9pm.

This month’s bond offering is slightly below 3% average 10-year yield. Yield curve has flattened again, so you would get pretty much ~3% yield every year for 10 years.

If you’re looking for places to park your cash or SRS funds for the long term but still want the option to terminate early without penalty, SSB could be a good option. Unfortunately, SSB is not eligible for CPFIS scheme so you can’t invest your CPF savings into it.

For more details, refer to my Singapore Savings Bond (SSB) tracker.

Why apply for SSB?

In my opinion, the main attraction of SSB is the long tenure while having the flexibility to redeem early without penalty. You’d also still be entitled to accrued interest upon redemption. So if interest rates continue to rise, you have the option of redeeming earlier bonds and applying for the latest issuance with higher interest rates.

Next month’s SSB projected yield

Based on 10-year SGS bond yields up till 18th July, the average yield is 3.10%. If yield stay at the current 2.98% for the rest of the month, projected yield would be 3.04% for Sep 2023 SSB.

My thoughts

Next FOMC will be on 26th July, and the market predicts 97% chance of 25 bps hike. Thereafter, the market expects the Fed to stop and maintain rates at 5.25%-5.50%, assuming inflation continues to cool. Market watchers still a small chance of one more 25 bps hike this year, though the probabilities are low.

Source: CME Fed Watch Tool

Fixed deposit rates have fallen to a point that I no longer find them attractive. However, T-bills seem to be pretty attractive, with yields creeping up. The last 6-month T-bill auction on 06 July 2023 had a cut-off yield of 3.99%. Next auction on 20 July 2023 will be interesting to watch whether the cut-off yield will exceed 4%. There’s also a 1-year T-bill auction coming on 27 July 2023.

Am I applying this round?

Since we seem to be reaching the end of this rate hiking cycle, 2.99% yield for SSB seems pretty attractive to me. I think next month’s SSB might yield slightly higher, and thereafter yields might start to drop off.

However, since the start of the S&P 500 bull market, I’ve started to deploy more cash into stocks. So far, I’ve not touched SSB and have liquidated from MoneyOwl instead. Going forward, I will be putting more cash to work in the stock market instead of leaving it in cash funds or bonds.

Currently, I’m sitting on $40k SSB which are our emergency funds. All are locked in at above 3% average 10-year yields. I don’t foresee myself putting any additional funds into SSB in view of the bull market in stocks. At most, I might only rollover lower yielding SSB for higher yielding ones if SSB yields increase materially above 3%.

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Disclaimer: This is not financial advice. I am not professional financial advisor nor do I work in the finance industry. Anything I write here is purely my personal opinion. Please do your own research and due diligence before investing into anything. All investments come with associated risks. Best to consult a financial advisor if you’re still unsure.

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