Last updated on 2023-01-03
The latest issue of Singapore Savings Bonds (SSBs) have average yields of 2.84% per annum for a 1 year holding period and 2.97% 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.
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 rose in the past year as interest rates rise to keep inflation in check. Similarly, SSBs yields have also rose considerably in the past year. The rate of increase in yields for both SSBs and SGSs have slowed in recent months. In fact, the recent yield for SSBs have dipped to 2.97% per annum for a 10 years holding period and 2.84% per annum for a 1 year holding period. However, yields are still near their record highs. This has increased the appeal of SSBs considerably compared to previously. See Singapore Savings Bonds for past historical yields.
Singapore Fixed Time Deposits offer depositors deposit rates of around 0.50% to 4.00% per annum for tenures of anywhere between 3 to 24 months since 2002. The current Money Lobang National Average Fixed Deposit Rates for January 2023 is 3.27% p.a. and it has been rising in recent months. Minimum deposit varies widely but is usually around $20,000. Deposits in SRS accounts cannot be placed in fixed deposit accounts. Banks seldom offer fixed deposits promotions for tenures above 24 months due to the lack of demand. 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 most banks.
Fixed Deposit interest rates soared in 2022 and the rate of increase has somewhat slowed in recent months. Fixed deposit rates are now considerably higher than SSB yields. Fixed deposit rates will continue to remain high for the rest of the year as inflation doesn't appear to ease off anytime soon. See Average Fixed Deposit Rates for past historical returns.
A quick look at Highest Fixed Deposit Interest Rates in Singapore will show that almost all banks offer higher deposit rates as compared to the 2.84% 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 2.97% per annum is also lower than Singapore Fixed Time Deposits assuming you renew your fixed deposits at current interest rates everytime their tenure is up. The lower return over the long term makes SSBs somewhat less 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.
Buy Singapore Savings Bonds but place more funds in new fixed deposit as fixed deposit interest rates are currently much more attractive. Rates or both are still expected to increase in the upcoming months. You may want to actively sell your old Singapore Savings Bonds and transfer your funds to fixed deposits as fixed rates are currently more attractive than Singapore Savings Bonds yields.
Singapore Savings 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.
The long term yields of SSBs might be lower than Singapore Fixed Time Deposits after the recent spike in fixed deposit rates. However, depositors with an eye for the long term should have a risk-free but balanced portfolio consisting of both SSBs and Singapore Fixed Time Deposits.