Singapore Savings Bond SSB Sep 2023 at 3.06%: Is It Attractive?

SSB Sep 2023 rates

The latest Singapore Savings Bond SSB Sep 2023 (SBSEP23 GX23090F) offering is out: The average 10-year rate is 3.06%, and the first-year rate is 3.01%. This is excellent news for investors as we return to the 3% level. Yay! This offer also provides higher first-year and average 10-year rates in line with the ongoing trend of increasing rates. This SSB offering looks juicy. Should we consider applying for this month’s offering?

 

Key Takeaways

  • The rates for SSB Sep 2023 are slightly higher than last month’s offering, with the average 10-year rate at 3.06%. This is a rather attractive proposition as the market expects that we are nearing the end of this rate hike cycle. This can be an excellent opportunity for investors seeking capital preservation to lock in higher rates for the next ten years.
  • This SSB Sep 2023 can be an opportunity for investors who want to recycle older SSBs yielding below 3%.
  • For investors looking to park their cash in the short term, you may consider other alternatives such as 6-month / 1-year T-bills or high-yield savings accounts.

 

SSB Sep 2023 Offering

SSB SEP 2023

This month’s offering is rather attractive as it offers above 3% rates for the whole duration. The rates are slightly higher than Aug 2023 offering, where they were still below 3%. And guess what? This SSB Sep 2023 offering is one of the highest in recent years.

This is an excellent opportunity for long-term investors who seek capital preservation. If you are interested in applying for this month’s SSB, please take note of the following application timeline:

SSB Sep 2023 application timeline

You may apply via DBS, OCBC, or UOB online banking. We have written a step-by-step guide on how to buy SSB.

 

Should We Invest in SSB?

SSB is a good instrument for long-term investors seeking capital preservation. Because SSB is a long-term Singapore government bond, your principal and interest payouts are guaranteed by the credit of the Singapore government. Additionally, SSB provides flexibility allowing partial or full withdrawal every month. You even earn the accrued interest up to the time of redemption.

SSB is likely still a good choice if you are looking at a fixed-income investment with such flexibility.

How Attractive Is the Current Offering?

We can compare this SSB Sep 2023 offering with the historical SSB interest rates:

SSB Sep 2023 Historical Interest Rates

The chart above shows that historically, the current first-year and 10-year average rates are relatively high. They are one of the highest in recent years. This month’s offering aligns with the rising rates trend observed in the last few offerings.

Where Are Interest Rates Heading?

The million-dollar question is whether interest rates will continue to increase in the coming months and whether we can hold off on investing this month in anticipation of higher rates next month or later this year. Well, let’s look at the market expectation:

Rates market expectation Aug 2023

The current benchmark interest rate stands at 5.25-5.50%. From the table above, we can see that the market does not expect any more rate hikes. On the flip side, the market expects rate cuts to start towards the second quarter of next year.

From their last FOMC meeting, the Fed expects only one additional rate hike this year before reversing to rate cuts next year.

Whichever ends up playing out, both the market and the Fed expect that we are reaching the tail-end of this rate hike cycle. If you agree with them, maybe now is a good time to start locking in higher rates for longer.

Recycle Older SSBs

SSB had seen low demand in the last several offerings. This trend will likely continue again this month as most investors interested in SSB had optimized their allocation earlier this year when rates were also above 3%.

If demand remains low, investors will have a good chance of getting their full desired allocation. Therefore, if you have older SSBs with yields much lower than 3%, this SSB Sep 2023 offering may be an excellent opportunity to recycle those older SSBs.

 

SSB Alternatives

For Short-Term Investors

Because our yield curve is currently inverted, the short-term interest rate is higher than the long-term interest rate. If you want to park your cash for the short term, you may consider alternatives such as T-bill or high-yield savings accounts instead of using SSB. The last 6-month T-bill auction yielded 3.85%. Some high-yield savings accounts offer even higher rates above 4%, though with some hoops you need to fulfill, such as salary crediting, credit card spending, etc. If you can meet those criteria, those savings accounts may be a good alternative.

Additionally, investors may also consider mixing short-term and long-term instruments to benefit from the inverted yield curve while still locking in rates for the longer term.

For Higher Risk Alternatives

Other higher-risk asset classes, such as stocks and REITs, may benefit when the interest rate reverses next year. The US stock market has rebounded strongly this year and entered a bull market.

If you are an investor comfortable with more risk, you may want to consider these options that could offer higher returns. But as always, please exercise prudence when investing.

 

What Would We Do?

Most of our SSB allocation was optimized when rates were hovering around 3% earlier this year, so we will likely only recycle a small portion of our older SSB with this SSB Sep 2023 offering. Additionally, we use T-bills and high-yield savings accounts for parking our short-term cash as they offer higher rates due to the inverted yield curve.

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Disclaimer: The information provided here is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice or recommendation of any sort.

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David Ang

About David Ang

A long-term investor with a portfolio across the United States and Asian equities, REITs, commodities, and fixed incomes. After over a decade of hands-on investing (and making countless mistakes), I'm excited to use this platform to share what I've learned over the years. And let's continue to learn together. Writing about macro economy, equities, personal finance, web3. Follow me on Twitter: @danggaku