The interest rate for Singapore Savings Bond (SSB) Aug 2022 is at at whopping 3% p.a. if held to maturity. This is the highest I’ve seen in the SSB history.
If you invest $10,000, and hold it to Maturity at the 10th year, you would have earned $3,019.
1st year’s interest is at 2%. If you decide to redeem after the 1st year, you will still earn $200. This is a lot higher than if you hold money in a bank.
Why is interest rate rising?
Simple answer is because inflation is rising. The core inflation rate in May for Singapore is at 3.6%.
Inflation usually means that there is more demand than supply, thus causing prices to increase.
By increasing interest rates, this makes borrowing more expensive. So lesser people will borrow money to buy things. And hopefully this will bring the demand down, and when there is less demand, then inflation will fall.
How is the SSB interest rates determined?
The SSB on offer in any given month are linked to the daily average SGS yields as published by MAS
https://www.mas.gov.sg/-/media/MAS/News-and-Publications/Press-Releases/Annex-1-FAQ.pdf
in the previous month
Please check out this post for a detailed guide on predicting the future SSB rates.
Should you buy?
If you have money in the bank that are just sitting there doing nothing, hell yes! Otherwise, you will just be losing money to inflation.
Let’s so some comparison on similar products.
This is a table I pulled up from the DBS Fixed deposit rates. It is between 0.05% to 1.3% depending on the Tenor and the amount. Nothing compared to the SSB rates.
Singtel Dash Pet is offering 1.5% p.a. I have personally been using this for a while now to park my idling cash. I am just surprised that they have not start increasing rates. I’ll probably be withdrawing my cash out to SSB at this point.
Endowus Cash Smart is offering between 1.1% to 2.9% of projected returns depending on the portfolio. These are not guaranteed returns.
Syfe Cash+ is offering 1.5% of projected returns. Again returns are not guaranteed.
DeFi lending platforms such as Aave and Compound are only offering 0.70% and 0.27% respectively on USDC Lending.
Of course there are a lot of DeFi or CeFi platforms that are offering much higher rates. But at this point in the crypto bear market, it is best to avoid them. Not worth the risk at the moment.
Summary
| Product | Yield |
|---|---|
| SSB | 3.0% (Guaranteed) |
| DBS FD | 0.05% to 1.3% depending on the Tenor and the amount (Guaranteed) |
| Singtel Dash Pet | 1.5% (Non guaranteed) |
| Endowus Cash Smart | 1.1% to 2.9% depending on the portfolio (Projected Returns) |
| Syfe Cash+ | 1.5% (Projected Returns) |
| Aave (DeFi) | 0.70% (rates fluctuates depending on supply and lending volume) |
| Compound (Defi) | 0.27% (rates fluctuates depending on supply and lending volume) |
Based on the comparison above, we can see that SSB is the clear winner here.
Is SSB safe?
SSB is fully backed by the Singapore Government. This means that you can always get your full investment amount with no capital loss.
Singapore bonds has a credit rating of AAA. This shows that Singapore bonds has strong creditworthiness, with a very low probability rate of default.
So I think a better question is, do you trust the Singapore Government?
Can SSB be redeemed early?
Yes, SSB can be redeemed at any given month with no penalty. You will be paid the principal plus any accrued interest. You should redeem the bonds before the Closing Date for it to be paid out on the 2nd business day of next month.
SSB is flexible in a way that you can get your principal by next month, but it is not flexible enough if you need the money now. So you should always have a stash of emergency money in the bank before putting any into SSB.
How to buy SSB?
You can apply through internet banking or through DBS/POSB, OCBC and UOB ATMs. Check out this Step By Step guide on How to buy SSB.
You have between now till 26 Jul 2022, 9pm to apply.
There is a min amount of $500, and in multiples of $500. And the total amount of SSB you hold cannot exceed $200,000 at any given one time .
You can find out more about this month’s SSB here.
Allocation Results
The Aug SSB was over subscribed by 3.4x. So basically if you bought $9,000 or lower, you will be fully allocated. Applicants who applied for $9,500 or higher were allotted either S$9,000 or S$9,500.
