Bonds Singapore Market

Singapore Savings Bond (SSB) Feb 2023 – Yields Falling Further

Calvin Lo

Singapore Government Securities (SGS) 10-year bond yields, of which Singapore Savings Bond (SSB) yields are based upon, have resumed their fall so far in Dec 2022 and have recently sunk below 3% after U.S. CPI and FOMC on 13 and 14 Dec respectively. CPI came in lower than expected and the Fed hiked 50 bps as widely expected.

That was the last FOMC for the year, and the next one will only be on 1 Feb 2023. With the Fed projecting to raise rates up to a terminal rate of 5.1% and rates currently at 4.25-4.5%, we might be looking at only 2-3 more hikes in 2023 to get there.

Source: Trading Economics

Since Feb 2023 SSB yield will be based on the average daily 10Y SGS yield for the month of Dec 2022, we can start to make a calculated guess about what next month’s SSB yield might be even though we’re only halfway through the month. Currently up till today (16 Dec), the average daily 10Y SGS yield is at 2.98%. Since yields seem to still be on a downtrend, we can project with reasonable confidence that rates might stay below 3% for the next 2 weeks unless macro changes materially.

If you want to lock in the higher yield of 3.26% for Jan SSB for the next 10 years, make sure you apply by 27th Dec 2022.

Source: MAS

Personally, I’ll likely be applying for $18k worth of Jan SSB. Depending on how much I’m allotted, I’ll redeem the equivalent in July and Oct SSB which are yielding around 2.7% only.

Read also my previous post about Jan 2023 SSB.

I think the long end of the bond yield curve (10 years & above) will continue to remain depressed, thus SSB yields might likewise remain depressed. That said, in the short term, the short end of the yield curve might continue to rise as the Fed hikes to its terminal rate (currently expected to be 5.1%). Inflation appears to have peaked for now, so the risk has shifted from inflation overheating to the Fed over-tightening and pushing the economy into a deep recession.

I’ve also compiled some stats and charts from MAS website on my SSB tracker.

So once I’m done optimising my SSB, I’ll consider shorter term T-bills or Fixed Deposits for the rest of my idle cash since I expect them to continue offering attractive yields.

Read also my post on How I Manage My Cash Between SSB, T-Bills, Fixed Deposits and Cash Funds.

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