Bonds Singapore Market

Singapore Savings Bond (SSB) May 2023 – Last Chance For Yield Above 3%?

Calvin Lo

The latest SSB for May 2023 has been announced with a 10-year average yield of 3.07%, a slight decrease from last month’s SSB offering 3.15%. The first year yield is 3.03%. If you’re interested, remember to apply by 25 April, 9pm.

Source: MAS

This month’s bond is still yielding on the higher end vs recent issuances, and has a relatively flat yield curve (i.e. you get pretty much the same yield every year for the next 10 years). Usually SSB is structured such that you get lower yields at the beginning but get increasing yield as you hold the bond for longer.

SSB average 10-year yield is based off the daily average yield of the 10-year SGS bond for the prior month. This month April 10y SGS bond yields has dropped significantly at the start of the month and has been trending slightly below 2.8%. If this yield doesn’t change much for the next 2 weeks, next month’s bond (for June 2023 issuance) would probably be around 2.8X%.

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.

Alternatives in Fixed Income

Although one of the safest (backed by Singapore government), SSB is definitely not the highest yielding fixed income instrument in the market. High yield savings accounts, cash funds, fixed deposits and even Treasury bills are yielding higher.

See table below from info I’ve gathered from various sources on fixed income yields (not exhaustive). Also check out my Fixed Income Tracker page for the latest version.

Why SSB might still be worth applying for

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.

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

With inflation cooling and the Fed seemingly reaching the end of this hiking cycle, I don’t expect interest rates to bounce back especially on the long end (10 years+). IMO, this might be the last chance to get SSB above 3% for the foreseeable future. Of course, I could be wrong or the macro situation could change drastically.

Source: World Government Bonds

That said, I always advocate having a mix of longer term SSB and shorter term FD, T-bills, cash funds, or even high-yield savings accounts for emergency funds or the cash portion of our portfolio.

Am I applying this round?

My allocations to SSB have been fully optimised, i.e. I have all I want and all above 3.07% yield. I’ll be redeeming the extra $22k I used for rollover of lower yielding SSB. I’m still undecided on whether to park some of my investment cash into this month’s SSB since the first year yield is relatively high so I won’t lose as much if I redeem it early.

Will you be applying for this month’s SSB?

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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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