The latest issue of Singapore
Savings Bonds (SSBs) have average yields of 1.62%
per annum for a 1 year holding period and 1.74%
per annum for a 10 years holding period. The minimum investment
is $500 with a maximum holding of $200,000 at any point of time.
The holding period for SSBs can be up to 10 years with investors
being able to redeem their bonds at any point in time without any
penalty. The sum invested is guaranteed by the government with no
risk of loss of capital. Investors can apply and invest in SSBs
from 7 a.m. to 9 p.m. Monday to Saturday excluding Public Holidays
at local banks ATMs or online banking using cash or SRS every month.
Visit Singapore Savings Bonds website
to get the most up-to-date information about the latest issue of
Singapore Savings Bonds.
Average Yield for 10-Years SSBs for Past 12 Months
Future Direction of Yields for SSBs
Returns for SSBs matches the returns for Singapore Government Securities
(SGSs) of the same holding period at the time the SSB is issued.
The yields of SGSs have been kept low due to Singapore's strong
fiscal position and strong credit rating. Hence, each newer issue
of SSBs every month has seen lower yields to match the low yields
in SGSs. Recent yields for SSBs have dropped to 2 year record lows
of 1.62% per annum for a 1 year holding period
and 1.74% per annum for a 10 years holding period,
levels that were last seen in 2016. This downtrend in rates is set
to continue and could decrease the appeal of SSBs substantially.
Singapore Fixed Time Deposits
Time Deposits offer depositors deposit rates of around 1.00%
to 2.00% per annum for tenures of anywhere between
3 to 24 months since 2002. Minimum deposit varies widely but is
usually around $20,000. Deposits in SRS accounts cannot be placed
in fixed deposit accounts. Banks usually do not offer fixed deposits
for tenures above 24 months and even if they do, the deposit rates
are usually uncompetitive. Withdrawal of fixed deposits before the
tenure is up will result in penalties such as depositors forgoing
the interest, returning of promotional gifts or even paying a stated
penalty. All deposits in Singapore including fixed deposits are
insured by the Singapore Deposit Insurance Corporation for a sum
of up to $75,000. Depositors can open a fixed deposit account anytime
at any bank branches and even through online banking for certain
Future Direction of Fixed Deposit Interest Rates
Fixed Deposit interest rates have been dropping ever since the
Federal Reserve lowered interest rates recently in view of a possible
economic slowdown. The trend has accelerated in the past few months
or so as fears of a recession increase and is most noticable in
August 2019. Fixed deposit rates have peaked in mid 2019 and is
now trending downwards.
Singapore Savings Bonds vs Fixed Time Deposits
A quick look at Highest
Fixed Deposit Interest Rates in Singapore will show that most
banks offer higher fixed deposit rates as compared to the 1.62%
per annum that SSBs yield if your holding period is 1 year. Comparatively,
if your holding period is for the full 10 years, SSBs average yield
of 1.74% per annum is also lower as compared to
Singapore Fixed Time
Deposits assuming you renew your fixed deposits at current interest
rates everytime their tenure is up. This makes SSBs
not attractive to depositors looking for alternative financial products.
With a minimum purchase of $500 and a maximum holding of $200,000
worth of SSBs at any point of time, SSBs are quite restrictive for
savers who want to park more than $200,000 in a safe investment.
They are however ideal for Singaporeans who have less than $200,000
and are looking to growing their money instead of leaving them in
their savings or SRS accounts.
SSBs are extremely liquid as they can be redeemed anytime and the
capital will be back in the investor's account within a month without
any penalty. Comparatively, depositors incur a penalty when they
withdraw a fixed deposit before its tenure is up. Both SSBs and
fixed deposits are extremely safe with loss of capital extremely
unlikely even in the event of a financial crisis.
Park your money in Fixed Deposits but Monitor Yields of
Singapore Savings Bonds
Bonds can cover the needs of most Singaporeans who want to save
for the long run and it makes sense to invest in it as an alternative
product to short term fixed deposits that banks can offer currently.
Investors/savers will get more certainty of the interest rates over
the course of 10 years if they purchase SSBs as compared to fixed
deposit interest rates which fluctuate with market conditions. SSBs
provide a competitive product to fixed deposits with higher returns
for depositors in the long term and is a free gift from the goverment.
However, the yields of SSBs are low compared to Singapore
Fixed Time Deposits and SSBs yields have been dropping faster
than fixed deposit rates. It could be a race to the bottom but fixed
deposit rates are currently more attractive than SSBs with higher
returns. Depositors can continue to monitor the yields of SSBs and
only buy them if their yields exceed Singapore
Fixed Time Deposits.