Bonds Singapore Market

Singapore Savings Bond (SSB) Mar 2023 – Wait For Higher Yields

Calvin Lo

The latest SSB for March 2023 has been announced with a 10 year average yield of 2.9%, down quite a bit from the peak of 3.47% for the Dec 2022 issuance. If you’re looking for places to park your cash or SRS funds, SSB could be a good option. Unfortunately, SSB is not eligible for CPFIS scheme so you can’t invest your CPF savings into it.

Source: MAS

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

Alternatives offer higher yields

Treasury bills or T-bills, fixed deposits, and even some bank savings accounts offer higher yields than SSB at the moment. Most cash funds and short-term bonds now offer around 4% yield.

T-bill yields have been falling though, and the last auction on 2nd Feb 2023 for 6-month T-bills had cut-off yield of 3.88%.

Source: MAS

According to Seedly, fixed deposits are offering up to 4.10% (offered by RHB for 12 months tenure, min $20k placement).

Source: Seedly

As for cash funds, MoneyOwl WiseSaver is offering 4.01% 5-day MA yield, but this rate fluctuates daily.

Source: MoneyOwl

Bank savings accounts are also offering very attractive yields but require you to jump through hoops to get there. For instance, Standard Chartered has recently increased this interest rate on Bonus$aver account, depending on which criteria you fulfil.

Source: Standard Chartered

Why SSB might still be worth applying for

The main attraction of SSB in my opinion, is the long tenure yet 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.

In contrast, if you’re mostly in T-bills or fixed deposits which usually have short tenures and interest rates start to reverse back downwards, you might not be able to find similar high yields when your T-bill or fixed deposit matures.

My thoughts

If you believe that the Fed will hold interest rates higher for longer, T-bills or FD might be a more attractive option than SSB. Personally, I don’t have confidence in this Fed and I’ll prepare for either possibility.

The Fed has also indicated that they still have a few more rate hikes to go before reaching their terminal rate of around 5.1%. Recently in Feb 2023 FOMC, the Fed hiked by 25 bps and indicated that the terminal rate is close.

However, there’s always the possibility that inflation eases or the economy deteriorates faster than expected, forcing the Fed to pivot earlier than expected. Personally, I don’t think this will happen, but I would still want to hedge for that possibility especially for funds I don’t intend to touch for the long term but I still want to keep liquid. So, I think locking in some SSB for the next 10 years, despite lower rates might still make sense.

Another consideration is if you’re holding older lower-yielding SSB issuances, you might want to consider rolling some over more aggressively, since demand for SSB has cooled off and you can probably secure larger allotments. SSB issuances from Oct 2022 and before (except Aug 2022) might be worth rolling over to this month’s SSB with higher yield.

On the bright side, demand for SSB has cooled off significantly. Last month, all applicants were fully allotted. With yields lower this month, likely will be full allotment as well.

That said, so far this month, SGS 10Y bond yields have been climbing back up again. Seems like the market might be buying into the Fed’s narrative of higher for longer and/or expecting a higher probability of a soft landing with the jobs data coming in so strongly. If 10Y yields continue to go up or even stay around these levels, next month’s Apr SSB issue should come with higher yields. However, it’s too early in the month to estimate what the yield could be with fair accuracy.

Source: World Government Bonds

Am I applying this round?

Since the $13k allotted from last month was meant to roll over $13k of Sep 2022 SSB, I’ll be redeeming that tranche. With that, all my SSB tranches will be above 2.9%. So I won’t be applying this round, and will wait till SSB yield cross the 3% threshold again.

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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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