Singapore Savings Bonds SSB October 2024: Year 1 (2.59%), 10-Year (2.77%) | Turtle Investor – The Global Tofay

The SSB October 2024 issue of Singapore Savings Bonds by the Monetary Authority of Singapore posted a significant decline in its returns compared to the previous issue.

• First-year returns are 2.59%
• The 10-year average return is 2.77%

This is definitely a disappointing issue for investors hoping to put more cash into SSBs before the Fed rate cuts take place this month.

To make matters worse, next month’s issue (see below) isn’t likely going to see higher returns.

On my SSB historical interest rates page, you can view the full history of the Singapore Savings Bonds issues presented in table format and the number of SSBs for each issue that investors have already redeemed.

Singapore Savings Bonds returns reached the previous high in December 2023 (3.40%) as the momentum of the Fed rate hikes gathered pace.

Looking at the table above, I think many people have already started redeeming their inferior issues. You probably should, as well.

Short-term options such as the Fullerton Cash Fund and Mari Invest (see comparison) are currently good choices that I am using for returns on idle cash.

If you are interested in knowing more about Singapore Savings Bonds, check out my articles below.

1. SSB Oct 2024 – SBOCT24 GX24100H

Here are the details and yearly interest rates on the latest issue of the SSB October 2024.

• Amount Offered – S$800 million
• Interest Payment Months – October and April
• Opening Date – 02 September 2024 at 6:00 pm (First business day)
• Closing Date – 25 September 2024 at 9:00 pm (Fourth last business day)
• Allotment Date – 26 September 2024 after 3:00 pm (Third last business day)
• Issue Date – 01 October 2024
• Maturity Date – 01 October 2034

2. Recap: What are Singapore Savings Bonds?

Singapore Savings Bonds are safe and flexible bonds for individual investors. They allow us to enjoy increases in returns over time and redeem in any month without penalty.

Singapore Savings Bonds are a special type of Singapore Government Securities with these features that make them suitable for individual investors:

1. Safe → Savings Bonds are backed by the Singapore Government, and they can always be redeemed for the amount invested with no capital losses.
2. Long-term → You can invest for up to 10 years and earn interest that increases over time. The longer you hold your bond, the higher your return.
3. Flexible → You don’t have to decide at the start how long you want to hold your Savings Bonds. You can get your funds back within a month with no penalty.
4. No capital losses → SSBs are non-tradable securities that protect individuals from capital losses.

3. How Is The Singapore Savings Bonds’ Yield Determined?

Singapore Savings Bonds offer a return that corresponds with how long we hold them.

• By design, we receive less interest at the start, but the amount “steps up” or increases over time.
• The longer we hold our Savings Bonds, the higher our effective return is.
• The interest rates of each Savings Bond issue are based on the average Singapore Government Securities (SGS) yields the month before applications for that issue open.

People have often wondered how the rates are determined. I found the authoritative answer, but I’m not good enough at Maths to understand everything in it.

If you are into the Maths behind SSBs, the official documentation is the authoritative source (MAS) to learn how the Savings Bond’s tenor’s coupon rate for each year is determined. Refer to the formula below.

We need to understand these two things if you are an average Joe like me.

• If you hold your savings bond for the full ten years, your return will match the average 10-year SGS yield the month before you bought the bond. See the next section to learn more. In case you’re wondering, the 10-year SGS yield has hovered between 2% and 3% for most of the past decade.

• The interest rates may be adjusted to maintain the “step-up” feature if market conditions do not allow it – which is our current situation (inverted yield curve).

4. Singapore 10-Year Bond Yield

As I have mentioned in the previous section, by holding our Singapore Savings Bonds for the full ten years, our returns will match the average 10-year SGS yield the month before we bought the bond.

I have referenced the Singapore 10-Year Government Bond chart above for the past months.

5. Inverted Yield Curve

It is essential to understand that all else being equal, a bond with a longer maturity will usually pay a higher interest rate than a shorter-term bond since longer-term debt carries greater risk.

A normal yield curve implies stable economic conditions and a normal economic cycle.

An inverted yield curve is rare but suggests an economic slowdown.

What we are experiencing right now, whereby short-term bonds are yielding higher than long-term ones, is an anomaly.

Historically, an inverted yield curve is often seen as an indicator of a pending recession.

The official SSB documentation states the following.

There may be certain occasions where the reference SGS yields do not allow a particular Savings Bond issue to have a monotonically increasing step-up interest feature. When this happens, MAS shall lower the coupon rates by the minimum amount necessary to maintain a weakly monotonically increasing step-up coupon schedule.

The reasoning is that the whole intent of Savings Bonds is to encourage long-term savings. As a result,

• This may cause the average annual compounded return on the particular Savings Bond issue over one, two or five years to be less than the one, two and five-year reference yields.
• This will not affect the issue’s return if held to maturity, which shall always equal the ten-year reference yield (subject to slight differences of up to +/- 0.03% due to rounding in the computation of the step-up coupons).

6. Consider Redeeming Older SSB Issues

Don’t forget that you can always recycle your older and lower-yielding tranches for SSBs for newer ones if you happen to be still holding on to less attractive ones.

You can check out all the outstanding (vs. redeemed) SSBs on this MAS webpage.

7. Latest Probabilities Of FOMC Rate Moves

The CME Group FedWatch Tool calculates the probability of a rate hike by looking at the prices of federal funds futures contracts traded on the Chicago Mercantile Exchange.

These contracts allow people to bet on or protect themselves against changes in the federal funds rate. This tool collects data on the prices of these contracts and uses that information to estimate the chances of a rate hike. It calculates the implied probabilities based on how traders are pricing these contracts.

The implied probabilities as of today can be seen in the table above. I have included snapshots of previous months so that you can easily compare them and how sentiments have changed.

8. Higher Short-Term Yield Vs. Locking-In 10 Years Returns

Remember the inverted yield curve that we saw earlier?

From it, we have a rough idea of where SSB returns are headed compared to short-term cash yield.

Singapore Savings Bonds could be a great option if you want to lock in decent rates for your emergency funds due to their long-term certainty.

If you hope to benefit from the higher yield (3% to 4%) in the short term, you can consider putting your funds into:

9. How To Apply For SSBs Via Internet Banking (DBS/POSB)

Applying for Singapore Savings Bonds is effortless and will only take a minute of your time via internet banking.

Below are the screenshots of my application process via the POSB website.

Once in a while, I would experience a weird bug when trying to do this using the Chrome browser because the Apply button would be missing, but I had no issue when using Firefox.

If you are in the same situation as me, you may wish to disable any ad-blockers because it may interfere with the website.

I thought it might be helpful to point out this issue in case you are encountering the same problem as I did.

10. Invest Or Skip This SSB Issue?

To recap, Singapore Savings Bonds are a virtually risk-free investment option that offers attractive guaranteed returns for ten years.

For myself, I have already locked in all 6 issues of the highest yielding (more than 3%) SSBs, so I will only consider issues that offer extremely high yields.

Will you be deploying any of your money into this issue of Singapore Savings Bonds?

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Kevin started Turtle Investor when his net worth languished at negative $25,755. His desire to turn things around led him to build passive income from investments and side hustles that pay for his daily expenses and vacations. You can learn more about Kevin here.