Bonds Singapore Market

Why I Just Put S$40K Into Singapore Savings Bonds (SSB)

Calvin Lo

I just subscribed to this month for S$40K worth of the July 2022 issuance of Singapore Savings Bonds (SSB). This is the first time I’m subscribing, so I thought I’d share my thoughts and reasons for doing so.

July’s issuance of SSB yields 2.71% average return over 10 years. If you’re not familiar with SSB, the interest starts much lower and steps up every year until maturity. For the first year, July SSB only yields 1.69%. For more info on SSB, Singsaver has a great article here.

SSB yields have been increasing over the past few months, in line with higher interest rate expectations. Kyith from Investment Moats tracks SSB issuances every month and has a nice chart showing SSB historical yield here.

The S$40K actually comes from our emergency funds, not from our investment funds. Since SSB is fully backed by the Singapore government, I felt that it is a safe enough instrument to put some of our emergency funds in.

Up to this point, I’ve been holding all of our entire emergency funds in bank savings accounts earning close to nothing. I was willing to forego additional interest in exchange for peace of mind that I can access my funds instantly. After the birth of our second child last year though, I think that we have come to a point where we don’t foresee anymore big ticket expenses in the near future.

The math behind our emergency funds

We have a total of S$60K set aside for our emergency funds. This is based on a year’s worth of family expenses at a reduced rate of S$5K per month. Currently, we are spending an estimated S$6-7K per month but we can definitely cut off many discretionary expenses should we hit hard times e.g. retrenchment, health emergency, etc. So after putting S$40K into SSB, we still have S$20K in the bank as a buffer in case we really need the cash real quick.

What if we need our funds within short notice?

SSB offers the flexibility of redeeming early without penalties. However, we will only get the funds at the start of the following month. So worst case, we need a one month lead-time. That’s the only reason I’m not parking all our emergency funds into SSB. Though unlikely (touch wood), we can probably use credit cards to tide us through if we do need more than S$20K in less than a month while waiting for SSB to be credited.

Should we wait for higher interest rates?

Since interest rates are rising, why not wait for subsequent issuances where the interest rates could be even higher? I’ve thought about this and worked out that it may not be worth waiting for. For July SSB for example, the monthly interest rate within the first year is 0.14% (1.69% / 12). So the first year interest for subsequent issuance has to be at least 0.14% higher to make it worth the wait. However, I felt that interest rates have surged fast enough in anticipation of an aggressive Fed and I think the increase will slow in coming months.

Final thoughts

In my opinion, SSB offers a safe and flexible option to earn higher interest on your cash. Personally, I view SSB more of a cash management tool rather than a bond (although that’s what the ‘B’ stands for). So, I think SSB is a good place to park a portion of our emergency funds. We will still have a cash buffer to drawdown in the event of unexpected expenses.

However, I don’t think SSB isn’t well suited as a cash management solution for investments. It can be troublesome and slow to apply and redeem SSB between the time we contribute to our investment fund and whenever investment opportunities arise. So for our cash intended for investments, I’m still looking around for a solution. One option I’m considering are cash management solutions from Robo advisors e.g. Syfe, Endowus, and stock brokers e.g. Tiger, Futu. I’ll share what I find from my research on those options and what I settle on eventually later on.

Lastly, to summarise the benefits I get from SSB:

  • Virtually risk-free – fully backed by the Singapore government
  • Pretty liquid – can be redeemed early within a month without penalties
  • Additional interest – earn higher interest than bank savings account without having to jump through many hoops

Hope you found my sharing useful. If you don’t mind sharing, how do you manage your cash and emergency funds?

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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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8 thoughts on “Why I Just Put S$40K Into Singapore Savings Bonds (SSB)”

  1. Base on historical trends, this months SSB will be oversubscribed too.
    Most likely will get allocated around 10-15k only.

  2. Next SSB issue will be 0.3% more than this current issue, based on my calculations. It will be 3.0% 10Y average.

    1. Sounds reasonable. Do you expect the yield to continue rising around that rate in coming months?

      1. If u want to buy 40k worth of SSB, you will most likely need to apply across a few months.
        No need to time for the best rates, as you wont get allocated full 40k. This i can guarantee.

        1. Tks. Hadn’t considered that won’t be fully allocated. Since rates r rising, might actually be a blessing.

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