Best Fixed Deposit Rates in Singapore yield 4.00% – Better buy than T-Bills or Singapore Savings Bonds for your cash? Is your money in a Singapore bank safe? (March 2023)

 

Well, what a week!

Just last week we were talking about a 0.50% hike at the next FOMC, and a terminal interest rate of 5.75%.

One week later and after the failure of 3 US banks.

And now the market is pricing in interest rate cuts as early as June 2023.

With MAS even having to come out to issue a statement to reassure investors that Singapore’s banking system remains “sound and resilient”.

All while 6 month T-Bills yields plunged to 3.65%, making Fixed Deposit interest rates overwhelmingly the better buy for cash investments.

So I figured it was time to update the Fixed Deposit article.

And to answer the 3 questions below:

1. Is it safe to put more than $75,000 in a Singapore / foreign bank? Especially after the failure of Silicon Valley Bank?
2. Will fixed deposit interest rates go even higher from here?
3. Or should you lock in interest rates for 12 – 24 months here?

         

Best Fixed Deposit Interest Rates in Singapore yield 4.00% – Better than T-Bills or Singapore Savings Bonds for your cash investments? (March 2023)

First off – the full list of Fixed Deposit Interest rates is set out below.

Note that a lot of banks have revised their fixed deposit interest rates down sharply after the February promotions were over.

But I’ll just make it simple for you.

If you are comfortable with a foreign bank:

• State Bank of India offers 4.00% for 12 month fixed deposit with minimum of $50,000
• Alternatively HSBC offers 3.90% for 7 months fixed deposit with minimum of $30,000

If you prefer the peace of mind that comes with a local bank:

• UOB offers 3.85% for 6, 10 or 12 month fixed deposit with minimum of $50,000

Here’s the full list below:

And the same list in table form:

Bank	Interest rate per annum (As of 1st Feb)	Tenure	Minimum amount
State Bank of India	4.00%	12 months	S$50,000
HSBC	3.90%	7 months	S$30,000
RHB	3.90% (mobile placement)	12 months	S$20,000
Maybank	3.90%	12 months	S$20,000
UOB	3.85%	6, 10 or 12 months	S$50,000
Bank of China	3.85% (mobile placement)	12 months	S$5,000
ICBC	3.70%	12 months	S$20,000
Hong Leong Finance	3.60%	10 months	S$20,000
OCBC	3.55%	5 months	S$5,000
CIMB	3.45%	12 months	S$10,000
DBS/POSB	3.20%	12 months	S$10,000

 

 

If you are comfortable with a foreign bank

State Bank of India – up to 4.00% for 12 months (minimum $50,000 deposit)

State Bank of India is offering 4.00% for a 12 months Fixed Deposit.

Minimum deposit of $50,000.

Based on what I could find – this looks to be the highest Fixed Deposit interest rate in Singapore right now.

HSBC Fixed Deposit – 3.90% for 7 months (minimum $30,000)

If you’re not comfortable with State Bank of India.

Or if $50,000 is too high a minimum deposit for you.

Then you can consider HSBC.

With HSBC you can get 3.90% for a 7 months fixed deposit.

Alternatively you can also get 3.80% on a 3 or 12 months fixed deposit.

Minimum deposit of $30,000.

If you want to stick with a local bank

Now I know not everyone is comfortable with putting more than $75,000 in a foreign bank.

After the failure of Silicon Valley Bank and Signature Bank last week, and concerns over Credit Suisse’s solvency, I’m hearing a lot of concern from retail depositors on the safety of a foreign bank.

I’ll share further views on this below.

But for now, if you want to go with a local bank, UOB is probably your best bet.

UOB Fixed Deposit – up to 3.85% on 6, 10, 12 month (minimum $50,000)

UOB offers 3.85% on 6, 10 and 12 month tenures.

With a minimum deposit of $50,000.

That’s actually higher than HSBC (except for the 7 month duration), and is frankly very competitive.

This is probably what I would go for if I needed to put some money into Fixed Deposit right now.

What if the $50,000 limit is too high for you? And you still want a local bank?

If the $50,000 limit is too high for you.

And you still want the peace of mind that comes with a local bank.

The next best bet is OCBC.

OCBC was offering a 4.08% promo as recently as February.

Unfortunately that promotion is over, and it’s back down to 3.55% now:

Fixed Deposit compared versus Singapore Savings Bonds and T-Bills

As a comparison, latest T-Bills are at 3.65%

While Singapore Savings Bonds are at 3.01% for the first 6 years.

So Fixed Deposits are actually a great buy relative to both T-Bills and Singapore Savings Bonds, for short term cash.

 

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3 key questions that I want to discuss on Fixed Deposits

Okay, on to the more interesting stuff.

3 key questions to discuss:

1. Is it safe to put more than $75,000 in a foreign bank? Especially after the failures of Silicon Valley Bank?
2. Will fixed deposit interest rates go even higher?
3. Should you lock in interest rates for 12 – 24 months here?

Let’s discuss each of them.

Is it safe to put more than $75,000 in a foreign bank? Especially after the failures of Silicon Valley Bank?

If you recall with the Silicon Valley Bank fiasco last weekend.

Customer deposits are only guaranteed up to $250,000 in the US if there is a bank failure.

And so all those startups holding more than $250,000 with Silicon Valley Bank were scared out of their pants a whole weekend – as they weren’t sure whether they would be able to access their deposits on Monday.

Applied to Singapore.

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.

What is the risk of a foreign bank going under?

I’ve been getting quite a few questions on this over the past week.

Let me just put it out there and say that I think the risk of a foreign bank going under in Singapore is low.

This isn’t 2008, and banks have cleaned up significantly since Lehman after a decade of Basel III regulations.

Most of the banks these days hold $15 dollars capital for every $100 in deposits they hold.

This is compared to about $3 back in 2008.

If you’re not familiar with banking – that’s an absolutely monumental shift in terms of banking balance sheet strength.

And under MAS regulations – most of the Singapore branches of the foreign banks are segregated from their parent.

Such that even if the parent runs into difficulties, the Singapore branch *should* remain solvent.

But never say never

But as the events of the past week showed.

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.

Are Singapore banks “safer”?

Going by this logic, the Singapore banks (DBS, UOB, OCBC) are technically not risk free either, and deposits are only SDIC insured up to $75,000 too.

But personal view here – in the unlikely event that the local banks run into difficulties, there is a good chance of MAS or the Singapore government stepping in.

Especially when you consider the potentially systemic risk to the Singapore economy, if there were a true run on one of the local banks.

Singapore banks are arguably “safer” in their risk management practices too.

Less cowboy behaviour like what you saw at Silicon Vally Bank.

So… should you put Fixed Deposits in a Singapore Bank or foreign bank?

It really comes down to how kiasu you are.

And whether you’re fine to take on a slightly higher risk, for a slightly higher yield.

If you’re okay with a foreign bank you can get up to 4.00% with State Bank of India.

If you want to stick with a local bank you can get 3.85% with UOB.

What did I do – Fixed Deposit with a Singapore bank or foreign bank?

I’ve shared before that when I’m putting money in Fixed Deposit, I want it to be as close to zero risk as it gets.

So personally for me, most of my SGD fixed deposits are held with a local bank – a mix of UOB, OCBC and DBS (depending on which bank has the best promo at the point in time).

Yes, I know that technically I can spread $75,000 across multiple foreign banks and it’s still risk free.

But I don’t have banking relationships with most of the foreign banks, which means a trip down to the bank, which is just not my idea of fun for an extra 0.15% return.

But hey – that’s just me.

I leave it for readers to decide what is best for their own situation.

Will fixed deposit interest rates go even higher?

The next big question – will fixed deposit interest rates go even higher?

For the record, this is what the market is pricing in for the latest Fed Funds Rates.

You’re looking at one more 0.25% rate hike in March, followed by another in May – and then we are done for this cycle.

With interest rate cuts in June 2023.

First off – I do have serious doubts over whether this market pricing is correct.

This rate hike cycle is different from any the past 40 years, because the Feds cannot cut interest rates without worrying about what happens next with inflation.

February Core CPI came in at 0.5% month on month.

If the Feds are going to ease off tightening with this backdrop, I am genuinely concerned as to what happens next to inflation.

What is Powell likely to do at next week’s FOMC?

As shared on Twitter this week, I think the risk of policy mistake here is very real.

Right up until now there were no consequences in the real economy as a result of Fed tightening.

It’s easy to talk tough on inflation when nothing is breaking.

But this is where the rubber hits the road.

This is where we see Jerome Powell’s commitment to combat inflation, despite the risk of breaking things in the real economy.

My base case here is for a 0.25% rate hike next week.

0.50% is not impossible, but may be counterproductive given the market volatility.

And you may see Jerome Powell add language to say that they will monitor conditions closely and potentially slow the path of hikes going forward, to smooth out volatility from Silicon Valley Bank.

But.. look at the bigger picture

So personal view is that I don’t think this rate hike cycle is over just yet.

I still think rates go higher from here.

But I suggest to look at the bigger picture here.

We are now debating whether the terminal interest rate is 5.25% (as priced by the market) or 5.75% (as priced a week ago).

This is very different from a few months ago when the Feds were hiking 0.75% per meeting.

The discussion above matters if you’re trying to market time equities or fixed income (in which case it matters a lot).

But when you’re locking in fixed deposit, I do encourage you to look at the bigger picture.

Should you lock in interest rates for 12 – 24 months here?

Because of that – I think the bigger consideration here should be when you need the cash.

If you’re like me and you prize liquidity very highly (to respond to market volatility).

Then I would probably go with a 6 months fixed deposit here still.

That’s what I’ve been doing for most of my personal funds – mostly 6 – 8 months Fixed Deposit for me.

But if you don’t mind locking your money up longer term then a 12 or even 24 month fixed deposit may make sense.

You don’t have to put all your eggs in one basket…

Don’t forget you can ladder it to manage risk.

For example, you can put:

• 50% into a 6 month fixed deposit
• 25% into a 12 month fixed deposit
• 25% into a 24 month fixed deposit

To balance between liquidity needs while also locking in interest rates longer term.

Just in case market is right and interest rates are slashed in the second half of 2023.

UOB One Account – up to 5% on $100,000

Just a final note that for those prepared to jump through a couple of hoops, the UOB One Account is a very fantastic deal.

If you spend a minimum of $500 on your UOB credit card, AND credit your salary via Giro.

You can get up to 5% effective interest on $100,000.

Don’t forget all this cash is fully liquid (can be transferred out any time with no lockup period).

And 5% is comfortably above latest T-Bill and Fixed Deposit interest rates.

Very good deal if you can hit the requirements.

 

As always, this article is written on 17 March 2023 and will not be updated going forward.

If you are keen, my full REIT and stock watchlist (with price targets) is available on Patreon, together with weekly premium macro updates. You can access my full personal portfolio to check out how I am positioned as well.

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