The interest rate for Singapore Savings Bond (SSB) Jun 2024 (SBJUN24 GX24060A) is at 3.33% p.a. if held to maturity.
If you invest $10,000, and hold it to Maturity until the 10th year, you would have earned $3,341.00.
The 1st year’s interest rate is at 3.26%. If you decide to redeem after the 1st year, you will still earn $325.11.
Why is interest rate high?
The simple answer I had previously was because of inflation.
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.
However, if we look at the chart below, we can see that the core inflation is at 3.1% in Mar 2024. We can observe that inflation has significantly decreased and now appears to be stabilizing.
So then, why is the SSB interest rate higher than the core inflation rate?
One important point to consider is that inflation data are a lagging indicator, meaning they reflect past economic conditions rather than present or future trends.
SSB interest rates are tied to the yields of Singapore Government Securities (SGS). An increase in SGS yields may suggest adjustments for anticipated changes in inflation that the most recent data have not yet captured.
So looking at the daily yield of SGS for April, it equals to 3.33% on average.
How are SSB interest rates determined?
The SSB on offer in any given month are linked to the daily average SGS yields as published by MAS
in the previous monthhttps://www.mas.gov.sg/-/media/MAS/News-and-Publications/Press-Releases/Annex-1-FAQ.pdf
Please check out this post for a detailed guide on predicting the future SSB rates.
Comparison between SSB and other similar products.
OCBC Time Deposit
At time of writing, OCBC offers a fixed interest rate of 2.5% to 2.8% for a tenure of 6 to 12 months. To earn this interest, your funds must remain locked in for the entire tenure. Additionally, a minimum deposit of $30,000 is required.
UOB Fixed Deposit
Similarly, at time of writing, UOB is offering a fixed interest rate of 2.6% to 2.7% for a tenure of 6 to 10 months. To earn this interest, your funds must remain locked in for the entire tenure. Additionally, a minimum deposit of $10,000 is required.
DBS Fixed Deposit
Surprisingly, DBS seems to have the highest interest rates compared to OCBC and UOB. It is between 0.3% to 3.2% depending on the Tenor and the amount. A 6 months tenor yields 2.9%, and a 12 month tenor yields 3.2%.
Comparison Summary
| Product | Yield |
|---|---|
| SSB | 3.33% (10 yrs Guaranteed), 3.26% (1st yr, Guaranteed) |
| OCBC Time Deposit | 2.5% – 2.80% (Guaranteed) depending on tenor and min deposit is $30,000 |
| UOB Fixed Deposit | 2.6% – 2.7% (Guaranteed) depending on the deposit amount and min deposit is $10,000 |
| DBS Fixed Deposit | 0.3% –3.2% (Guaranteed) depending on the deposit amount and Tenor |
Should you buy?
From the comparison above, SSBs are an attractive option with a guaranteed annual interest rate of 3.33% and a first year’s interest of 3.26%. This rate outperforms the fixed deposit rates offered by the three local banks.
Moreover, SSBs offer the flexibility to be redeemed early without any penalties. If you decide to redeem early, you will be paid the principal plus any accrued interest.
If you are someone who is risk averse, I would say this month’s SSB rate is very attractive.
Additionally, considering the security and stability associated with government-backed investments, SSBs provide a safe haven for your capital while still offering a return that can potentially outpace inflation.
For those seeking a low-risk investment with reliable returns, especially in uncertain economic times, investing in SSBs could be a prudent choice.
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?
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 28 May 2024, 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.
HOW TO CHECK YOUR SSB ALLOCATION?
New SSB will be allocated on the 3rd last business day of the month (called the Allotment Day). You can check the results of your allocation after 3pm on Allotment Day.
Simply login to https://eservices.mas.gov.sg/ssb/ with your Singpass App. And you can see the results.
Example:
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 (prorated 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.