MAS has released its latest SSB Nov 2024 offering: 2.56% for the 10-year average and 2.25% for the first year. As expected, with the Fed cutting rates, the SSB rates also dropped again this month. So, given these lower rates, should we still consider SSB?
SSB Nov 2024 Details
SSB Nov 2024 offers 2.25% for the first year and 2.56% for the 10-year average. This month’s offering will likely disappoint most investors, as we are all used to the higher rates over the past few years.
However, as the US inflation cools and the job market softens, the Fed has no reason to keep interest rates high. So, it initiated its first rate cut of this cycle by 0.5%. As a result, Singapore government bond prices also fell, causing SSB rates, which track these bonds, to decrease as well.
Before we get too ‘gloom and doom’ on these lower SSB rates, let’s take a step back and see where we are historically:
The chart shows that the current rates are similar to those in mid-2022. They are lower than those in 2023 and 2024 but still respectable compared to those in 2021 or earlier. So, are you interested in this SSB Nov 2024 offering?
If you are yet to reach your desired SSB allocation and are interested in this month’s offering, please take note of the following application timeline:
Future Projection
The Fed has cut the interest rates by 0.5%. But this is just the start. The Fed projects another 0.5% rate by the end of this year and another 1% next year.
The market also seems to agree with the Fed’s projection:
With interest rates expected to fall further in the coming months, we can also expect the future SSB rates to trend downward following the pace of this rate cut cycle.
If you are still interested in increasing your SSB allocation, it may be a good idea to apply as early as possible before interest rates continue to decline.
What Do We Do?
We have advocated locking in higher rates for as long as possible by shifting short-term cash allocation from short-term instruments such as T-bills or fixed deposits into SSB.
This is indeed what we have been doing in the past several months. We have migrated our short-term cash allocation from T-bills into SSB to lock in the rates for the next ten years. The additional benefit is that SSB is more liquid than T-bills, allowing partial/full monthly redemption without penalty while still accruing interest.
Because we have migrated our short-term cash allocation to SSB, and the rates we locked in were much higher than this month’s offering, we won’t participate in this SSB Nov 2024 offering.
If you find the current SSB rates are no longer attractive and are comfortable with the reinvestment risk for your short-term cash allocation, you may also consider other alternatives. For example, 6-month T-bills still offer close to a 3% yield, or you could explore fixed deposits, which also offer interest rates of over 3%.
So, will you be applying for this month’s SSB? If so, you may follow our step-by-step guide on how to buy SSB.
