Details for June 2022’s Singapore Savings Bond (SSB) is out, and rates are looking compelling. The ten-year average return is 2.53% p.a, while even 2-year rates are close to 2% p.a:
|Year From Issue Date||1||2||3||4||5||6||7||8||9||10|
|Average p.a. return %||1.43||1.92||2.16||2.30||2.37||2.43||2.46||2.49||2.51||2.53|
What is Singapore Savings Bond?
The Singapore Savings Bond is fully backed by the Singapore Government, and offers to provide individual with a safe and flexible way to save. The principal amount and returns are guaranteed, and you can redeem your SSB for cash anytime (subject to the redemption timeline). See more information such as how returns work and how to apply/redeem in the write-up I did for May 2022’s SSB.
|Opening Date||Closing Date||Allotment||Issuance|
|1st business day of month (6PM)||4th last business day of the month (9PM)||3rd last business day of the month (after 3PM)||1st business day of the following month (end of day)|
|4th May 2022 (6PM)||26th May 2022 (9PM)||27th May 2022 (after 3PM)||1st June 2022 (by end of day)|
Thoughts and analysis
For last month’s SSB, it was discussed in the group chat that rates would likely continue to go up, and this month’s SSB has indeed gone up significantly in rates. Due to the very liquid nature of SSB, those who applied for May’s bond can always apply for this, and redeem their May SSB if desired. You would still get a pro-rated return, though there might be some cashflow concerns as you would have to place money in the June 2022 SSB first about a week before you get the money from redeeming May SSB.
This is of course a little troublesome, and some may wait for rates to peak before putting money in. Interest rates are expected to continue to increase over the next year or so. However, if your money is sitting around in low-interest accounts, you are incurring opportunity cost for sitting on the sidelines waiting for an opportune time to get into the SSB game. You may also eventually miss the peak you are waiting for, then have to settle for a lower rate. In any case, application/redemption is convenient enough with online channels, and the $2 fee you pay each time is likely negated by the higher interest SSB offers compared to most other low-risk and liquid alternatives.
I thought last month’s rate was attractive to place my emergency savings in, beyond having a couple of months’ worth of spending in bank accounts you can withdraw immediately. It is also a great place for idle SRS funds. June 2022 SSB’s rates are even better for these purposes. Last month saw a subscription of more than $231 million out of the $250 million tranche, a 92.5% subscription rate that hasn’t been seen in a while. June 2022’s tranche is significantly higher at $350 million, possibly in anticipation of the demand.
An insurer recently wanted me to highlight their short-term single premium endowment policy. I tend to highlight such things when they offered okay rates relative to the low-interest environment previously. Alas, the recent rates the insurer offered were not significantly above May 2022 SSB 2 to 3-year returns, which makes it quite pointless because you lose liquidity for very little extra returns. I declined to run the post, much to the contact person’s annoyance. Seeing this month’s SSB, however, they would probably have a quite a bit of free-look to deal and won’t have time to be annoyed with me.
It’s interesting how fast SSB has reacted to the rising interest rates. Bank deposits are quick to “revise” rates, but we haven’t heard a peep from them when it comes to tweaking rates back upwards. Until that happens, SSB is a compelling choice for idle funds you don’t want to risk volatility on.
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