MAS has announced the first SSB offering for 2024. Singapore Savings Bond SSB Jan 2024 interest rates are 3.07% for the 10-year average and 3.00% for its first year. Although this is a significant drop from last month’s offering of 3.40%, the overall rates are still attractive enough as they are above the 3% mark. Should we consider investing in this month’s offering?
SSB Jan 2024 Offering Details
This SSB Jan 2024 offers decent rates, with a 10-year average return of 3.07% and a first-year return of 3.00%. You will enjoy a return of >=3.00% p.a. throughout the ten-year duration; pretty decent, right? This month’s offering can be a good option if you want a fixed-income solution with the flexibility offered by SSB.
If you are interested in applying for the SSB Jan 2024, please take note of the following application timeline:
Please apply before the closing date on 26 Dec 2023 at 9 PM.
How Competitive Is This SSB Jan 2024?
Your first impression may be that this month’s offering is not too attractive because the rates are much lower than last month’s. But let us not jump to conclusions too early.
Historical Interest Rates
Where are the current offering interest rates in comparison to the historical rates?
The chart shows the movement of SSB interest rates in the past two years. We can see that this month’s offering is a decline from the previous month’s, but it is still at one of the highest levels in recent years. As a perspective, the interest rates were still hovering around 1.5% two years ago. Unless you have already fully allocated your desired SSB allocation, it is hard to argue that this SSB Jan 2024 is still attractive.
Future Interest Rate Expectation
More importantly, where will the interest rates go in the future? If interest rates continue to rise, there is not much urgency to invest right now, right? It is nearly impossible to answer this question with certainty, but we can see what the market and the Fed expect going forward.
The market expects the interest rates to stay current until early next year before reversing. The end-of-year rates are expected to be around 100bps lower. Whew, that’s quite a drop.
What about the Fed? The Fed has kept the rates steady in their last two meetings. The Fed expects just one more rate hike before reversing toward the latter half of next year.
From these projections, we seem to be at the tail-end of this rate hike cycle. If you agree with the Fed and the market, today may be an excellent time to consider securing higher interest rates for the next ten years by investing in SSB.
Who Is SSB Suitable For?
SSB is a long-term Singapore government bond with the flexibility of monthly redemption. You can redeem partially or in full every month without penalty and earn the accrued interest. Because the Singapore government guarantees your principal and interest payouts, SSB is considered one of the lowest-risk investments in the market.
Because of the low-risk profile, the return of SSB is relatively lower than other higher-growth investments such as stocks or real estate. Therefore, SSB is suitable for investors with the lowest risk profile who seek capital preservation and steady payouts while still having some flexibility to redeem every month.
Due to its liquidity, SSB can also be used to park short to medium-term cash (and lock in the higher rates for longer). You don’t have to park your money for the whole ten years. You can even redeem after one month if you wish. But by investing in SSB, you have the flexibility to keep it for a few years if you want.
Yield Curve Inversion
You may have heard that our yield curve is currently inverted, meaning the shorter-term interest rates are higher than the longer-term interest rates. In a normal economic environment, the reverse happens.
Investors may consider mixing short- and long-term bonds into their portfolio to benefit from this yield curve inversion. For example, investing in both T-bills and SSBs may give exposure to the higher short-term interest rates while still locking the longer-term interest rates while they last.
Recycle / Swap Older SSBs
We think this month can be an excellent chance to recycle or swap older SSBs (if you have any that yield lower). The total offering amount is higher at $1.1 billion compared to $1 billion last month. This month’s significant drop in interest rates could lead to a decrease in demand compared to the previous month. It’s worth remembering that last month’s SSB had a quantity ceiling of $20,500. If the demand decreases this month, you may be able to receive a higher allocation this time around.
What Would We Do?
Generally, we think this SSB Jan 2024 offering is still relatively attractive. You may consider adding SSB to your portfolio if you are looking for a fixed-income investment with a decent liquidity profile.
As for us, we have optimized our SSB allocation throughout the year and are satisfied with our holdings. As such, we will likely not participate in this month’s offering. We will continue to use a mix of T-bills and SSBs to park our short-term cash needs.
So, are you interested in applying for this month’s SSB? You may follow our step-by-step guide on how to buy SSB.
