What happened?

Many investors noticed that interest rates have been falling in recent weeks.

The cut-off yield for the latest 6-month T-bill dived to 3.34%, after investors gained confidence that the Fed will cut interest rates in September.

The best 6-month fixed deposit rate in Singapore has also fallen to 3.25% p.a..

This led to a question in the Beansprout community about how we can lock in interest rates before they fall further. 

I thought it might be worth highlighting that the latest Singapore Savings Bonds (SSB) SBSEP24 GX24090E offers a 10-year average interest rate of 3.1%.

Compared to the T-bills and fixed deposits, the SSB allows us to lock in a high interest rate for an extended duration of up to 10 years, while retaining the flexibility to redeem anytime. 

As such, we decided to take a look at what the indicators on what the projected interest rate for the next SSB might be.

This will allow us to understand if it is worthwhile to subscribe to the current SSB, or wait for the next SSB issuance. 

Is it worth applying for the latest Singapore Savings Bonds (SSBs) as T-bill yield falls?

#1 – Current SSB offers 10-year average interest rate of 3.1%

Let us take a look at the interest rates offered by the latest SSB. 

If you hold on to the SSB for 1 year, you will receive an average return of 3.06%.

If you hold on to the SSB for 10 years, you will receive an average return of 3.10% per year.

As shown in the chart below, the 10-year average return of 3.10% is lower than the rate offered by the previous SSB.

However, it remains above the historical average interest rate offered by the SSB.