Like many of you, I have some spare cash at the moment from the T-Bills bought back in November 2022 (maturing this month).
So I was looking at the latest Fixed Deposit Rates vs T-Bills to decide where the cash should go.
And my gosh – I was shocked to see the massive drop in fixed deposit interest rates the past few weeks.
Whereas just earlier this month you could get a 3.55% fixed deposit with UOB, as of today you’re looking at 3.20% only.
In any case, I wanted to share my latest research with readers, and why I will likely be buying T-Bills instead of Fixed Deposit after this.
Market is pricing in 2 rate cuts by end of 2023
The funny thing about interest rates is that market is pricing in 2 rate cuts by end of 2023, and almost 1 rate cut every FOMC meeting next year.
As shared previously, I do have my doubts over whether this pricing is correct, but let’s run with this for now.
If you’re a bank, and you’re looking at this interest rate curve where the market is saying interest rates are going to get slashed in the next 6 – 12 months.
Are you really going to offer an attractive Fixed Deposit interest rate, knowing full well that if the market is right you’re going to look very silly?
I thought so.
Best Fixed Deposit Rates in Singapore yield 3.75% – Better buy than T-Bills or Singapore Savings Bonds for your cash? (May 2023)
And therein lies the problem.
Because of this expectation of rapid interest rate cuts the next 6 – 12 months, the fixed deposit rates are all over the place based on tenure.
The full list of Fixed Deposit Interest rates is set out below.
But for ease of reference, let me break it down based on tenure:
If you’re putting a 3-month Fixed Deposit:
- HSBC offers 3.65% with a minimum of $30,000.
If you’re putting a 6-month Fixed Deposit:
- RHB Bank offers 3.55% with a minimum of $20,000.
If you’re putting a 12-month Fixed Deposit:
- State Bank of India offers 3.75% with a minimum of $50,000.
Get what I said about this being all over the place?
What if you only want a local bank?
And if you decide you only want a local bank – you’re only getting 3.20% for 6 or 10 months with UOB / OCBC.
Best Fixed Deposit Rates in Singapore (May 2023)
Here’s the full list below:
The same in table form – which I discuss in further detail below.
|
Bank |
Interest rate per annum |
Tenure |
Minimum amount |
|
State Bank of India |
3.75% |
12 months |
S$50,000 |
|
HSBC |
3.65% |
3 months |
S$30,000 |
|
|
3.45% |
6 months |
S$30,000 |
|
|
3.10% |
12 months |
S$30,000 |
|
RHB |
3.55% |
6 / 12 months |
S$20,000 |
|
UOB |
3.20% |
6/10 months |
S$10,000 |
|
OCBC |
3.20% |
6 months |
$20,000 |
|
ICBC |
3.55% |
3 months |
S$500 |
|
|
3.40% |
6 months |
S$500 |
|
|
3.40% |
12 months |
S$500 |
|
Bank of China |
3.55% |
3 months |
S$5,000 |
|
|
3.5% |
9/12 months |
S$5,000 |
|
Maybank |
3.55% |
12 months |
S$20,000 |
|
|
3.40% |
15 months |
S$20,000 |
|
|
3.50% |
6 months |
S$20,000 |
|
Hong Leong Finance |
3.50% |
10 months |
S$50,000 |
|
|
3.45% |
5-month |
S$50,000 |
|
Hong Leong Bank |
3.50% |
3/6 months |
S$100,000 |
|
Citibank |
3.48% |
6 months |
S$250,000 |
|
CIMB |
3.45% |
9 months |
S$10,000 |
Best 12 months Fixed Deposit – 3.75% with State Bank of India
At 12 months duration – the best option is 3.75% with State Bank of India.
Do note that minimum deposit is $50,000:
Best 3 months Fixed Deposit – 3.65% with HSBC
Or if you want something shorter HSBC is offering 3.65% for a 3 month Fixed Deposit.
Minimum deposit is $30,000:
Best 6 months Fixed Deposit – 3.55% with RHB Bank
If you want a 6 month Fixed Deposit, you can get 3.55% with RHB Bank if you’re interested:
What if you only want a local bank for your Fixed Deposit?
And if you decide you only want a local bank – you’re only getting 3.20% for 6 or 10 months with UOB / OCBC.
Absolutely terrible stuff.
Remember just a few months ago when OCBC was offering 4.08% on their Fixed Deposit?
Fixed Deposit compared versus Singapore Savings Bonds and T-Bills – Which is a better buy?
Because of that, I actually think T-Bills are looking very attractive compared to Fixed Deposit today.
Better Buy – Fixed Deposit vs T-Bills
The most recent T-Bills auction closed at 3.78%.
You can see the trend below – how yields are down firmly since December 2022 highs, but has stabilised at the 3.7 – 3.8% range since late March.
I will write more on this tomorrow, but I do think T-Bills should stay in the 3.7 – 3.8% range for now.
Do note with T-Bills you do lose a few days of interest (between auction date and issue date)
A couple of you have written in to highlight this point, so I wanted to discuss this quickly.
Do note that if you look at the exact timeline for T-Bills (the next auction for example).
The auction date is 25 May 2023, which means that by 24 May 2023 you need to apply and have the funds deducted from your bank account.
However, the T-Bills themselves will not be issued until 30 May 2023.
This means that you will lose the interest on the cash from 24 May 2023 to 30 May 2023.
So the effective interest rate on the T-Bills is slightly lower than the headline number because of this dynamic.
It brings the effective yield down about 0.05% – 0.10%, so do bear this in mind if you are comparing options vs fixed deposit and the numbers run very close.
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Better Buy – Fixed Deposit vs Singapore Savings Bonds
Fixed Deposit vs Singapore Savings Bonds is not really an apples to apples comparison.
Singapore Savings Bonds offer a much lower yield of 2.81%.
But the benefit is that you lock in interest rates for up to 10 years, and you can redeem any time with accrued interest.
So it’s more for investors who prize these qualities (10 year duration with full liquidity), but it does come at the cost of lower interest rates.
I myself hold close to my maximum entitlement in Singapore Savings Bonds ($200,000 per person, more if you hold via your family members).
Better Buy – Fixed Deposit vs High Yield Savings Account
Some of you have asked me about High Yield Savings Accounts and why I don’t write about them.
Just for the record, I myself use a High Yield Savings Accounts in UOB One, which I find to be the best savings account in the market right now.
You’re effectively looking at 5.0% effective interest rate on $100,000.
With full liquidity as this is a savings account – you can withdraw any time.
The only drawback is that you need to spend $500 on your UOB card and credit your salary via Giro.
For those who can fulfil this it shouldn’t be that hard, but there are some others who may not be able to fulfil these conditions (for eg. if you are a business owner or retiree with no salary).
Or perhaps you may not even want to bother jumping through these hoops for the additional interest.
So I leave it for each investor to decide what works for them.
But personally I use UOB One, and I pair it with UOB Stash Account for very liquid savings that generates very respectable yields (4% blended rate if you put $200,000 across UOB One and UOB Stash Account).
Anything beyond that $200,000, I still need to go with T-Bills or Fixed Deposit.
Better Buy – T-Bills vs Money Market Funds
There’s been an active discussion in the FH Telegram Group on money market funds as a place to park cash.
My apologies because I’ve been meaning to write a full article on money market funds, but haven’t gotten around to doing so just yet.
For now, the simple takeaway is this – money market funds are not a free lunch.
The yields are in line with T-Bills or Fixed Deposit at 3.5% – 3.8% ish.
But the liquidity does come at a cost.
In the sense that Money Market Funds are not capital guaranteed, so there is a very small chance of capital loss if things really go bad.
And in times of high market stress (think March 2020), you may not be able to exit the money market fund quickly without suffering losses, and may need to hold on for a few weeks / months to wait for conditions to stabilise.
So do note this point, money market funds are not a free lunch, and that liquidity does come at the cost of risk of capital losses.
Why I am buying T-Bills instead of Fixed Deposit (and where I hold the rest of my cash)
The T-Bills I applied in November 2022 have come due, so I have some cash lying around.
I’m not terribly excited by Fixed Deposit at these rates since the best 6 month option is RHB Bank at 3.55%.
Personally I don’t have an account with the foreign banks like State Bank of India or HSBC, so no way I’m going down to the bank in person to open a new account just for that extra 0.1% – 0.2% in interest rates.
Not when you’re probably going to see 3.7%ish on the 6 month T-Bills.
So I will be buying T-Bills with the spare cash on hand.
I’m fine with not having the liquidity because I have enough cash stashed away in Singapore Savings Bonds, UOB One and UOB Stash Account for liquidity requirements.
And just for the record, I do hold money in money market funds too – mainly my spare cash that is held in the brokers such as Moomoo, Tiger Brokers or Webull.
So that’s what I’m doing, and hopefully this helps you in deciding what is the right mix of options for your own cash.
SDIC insurance only covers up to $75,000
For those who plan to put more than $75,000 in deposits with any one bank.
Do note that SDIC insurance only guarantees customer deposits up to $75,000 if there is a bank failure in Singapore.
This means that any amount above $75,000 with a bank in Singapore is technically not insured under SDIC insurance.
Ie. You are taking on counterparty risk, the risk that the bank goes under.
Whereas with something like T-Bills or Singapore Savings Bonds they are backed by the Singapore government, so credit risk is basically zero.
What is the risk of a foreign bank going under?
Let me just put it out there and say that I think the risk of a foreign bank going under in Singapore is low.
But hey – You never really know what you don’t know sometimes.
While the risk of a foreign bank in Singapore going under is low.
I wouldn’t say the risk is zero.
I leave it up to each investor to decide for themselves if they are fine with this risk.
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