Latest Singapore Savings Bonds Allotment – Up to $14,500 per person! Why is interest for Singapore Savings Bonds going down?

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So the latest allotment results for the December Singapore Savings Bonds are out!

Each person who applied can get up to $14,500.

This is a pretty significant increase from the November Singapore Savings Bonds, which was just $10,500 per person.

Given that the interest rates for the latest Singapore Savings Bonds are even higher than November’s Singapore Savings Bonds, it’s worth investigating why the demand dropped so much.

   

Latest Singapore Savings Bonds Allotment – Up to $14,500 per person!

Diving into the details.

This round of Singapore Savings Bonds received $1.7 billion worth of applications (out of a $1.0 billion issue size).

This compares with November where it received $2.2 billion worth of applications (out of a $900 million issue size).

That’s a 22.7% drop in the amount of applications.

As a reminder, December’s Singapore Savings Bonds are actually better than November’s with a:

  • 1 year interest rate of 3.26% (vs 3.08%)
  • 10 year interest rate of 3.47% (vs 3.21%).

So the large drop in applications for Singapore Savings Bonds is worth noting.

In any case – Each person who applied will get either $14,000 or $14,500 worth of Singapore Savings Bonds, with a 39.34% chance of getting $14,500.

Why is interest for Singapore Savings Bonds dying down?

I suppose the simple answer is that the retail money seems to be flowing into T-Bills and/or Fixed Deposits instead.

With the latest 6 month T-Bills, even with interest rates coming down, you’re still getting 3.9% p.a. for 6 months.

And you’re looking at massive demand for T-Bills well above $10 billion for each of the last 3 T-Bill auctions:

While the latest Fixed Deposit pays 3.85% for 6 months from a local bank like UOB.

If you’re fine with a foreign bank, you can even go as high as 4.2% for 18 months from CIMB:

 

 

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Next month’s Singapore Savings Bonds might be less attractive

Unfortunately, next month’s Singapore Savings Bonds might have even worse yields.

Based on latest SGS yields, you’re looking at 3.78% on the 1 year, and 3.00% on the 10 year.

Once you smooth out the curve using the Singapore Savings Bonds formula, you might be looking at around:

  • Low 3% on the 1 year
  • Mid 3% on the 10 year

For next month’s Singapore Savings Bonds.

Will it still make sense to apply for Singapore Savings Bonds going forward?

The main advantage with the Singapore Savings Bonds of course, is the liquidity, and the ability to hold up to 10 years.

However, with interest rates quite a fair bit away from latest T-Bills / Fixed Deposit, for investors who don’t need the liquidity, it may no longer make sense to apply for the Singapore Savings Bonds going forward.

In any case, we’ll know the January Singapore Savings Bonds interest rates this week, and I will share further thoughts this weekend on whether it still makes sense to apply!

 

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2 COMMENTS

  1. The relatively higher interest rate environment has been going on for a while, and man on the street may have used up the spare cash that they have to put into these investment tools.

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