Singapore Savings Bonds at 3.26% yield – I am buying… but why are interest rates down so much? T-Bills or Fixed Deposit a better buy?



The latest Singapore Savings Bonds are out!

And they are quite a bit less attractive than last month’s.

You’re looking at:

  • 2.95% on the first year interest rate (vs 3.26% last month)
  • 3.26% over 10 years (vs 3.47% last month)

So… does it still make sense to buy Singapore Savings Bonds?

Especially when Fixed Deposit is at 4.0%, and T-Bills are at 3.9% – all risk free?


Latest Singapore Savings Bonds (Interest Rates and Issuance size both down)

Interest rates for the latest January Singapore Savings Bonds are below:

You’re looking at:

  • 2.95% on the first year interest rate (vs 3.26% last month)
  • 3.26% over 10 years (vs 3.47% last month)

Quite a bit less attractive than last month’s Singapore Savings Bonds:

Issuance size is also down to $900 million (from $1.0 billion last month).

3 big questions for Singapore Savings Bonds

3 big questions to address:

  1. Why are Interest Rates going down?
  2. Have interest rates peaked for this cycle?
  3. Will I still buy Singapore Savings Bonds?


Why are Interest Rates for Singapore Savings Bonds going down?

So I know that a lot of people like to complain about low-ballers on T-Bills.

They see T-Bills interest rates dropping from its peak of 4.19% to 3.9%, and they say it is because “mom and pop” is bidding low-ball numbers to get full allocation.

But Singapore Savings Bonds are a purer instrument in that there is no bidding process.

The yields are determined by average yields on Singapore Government Bonds the previous month.

So the fact that Singapore Savings Bonds are going down, is a clear sign that interest rates are going down.

If you need further confirmation, here’s the chart for the 10 year Singapore Government Bond:

You can see that it has very clearly gone down since early November, after the recent dovish US inflation print.

Same story with the US 2- and 10-year treasury:

Long story short, global interest rates have gone down since early November, as investors started to price in a more dovish Fed (because of slowing inflation).

But… is the market right in this call?

Have interest rates peaked for this cycle?

Have interest rates peaked for this cycle?

For investors looking to answer this question, you’ll probably want to give Powell’s speech this week a serious read.

The NASDAQ rallied more than 4% after the speech, which gives you an idea of how the market interpreted it.

My read – is that the Feds are going to raise interest rates slower going forward.

They want to avoid overtightening and causing a recession.

They want to tighten slower, to give themselves more time to watch the data, as they approach terminal rates.

BUT – bringing inflation (to the official 2% target) down remains the goal for now.

So as I shared in last week’s article, the question now is not so much how quickly we hike. But how high we need to go, and how long we stay there.

And that – depends very much on how inflation plays out in 2023.

So this is not a straightforward call.

Last night’s labour report shows that the labour market is still holding up well, which complicates the fight against inflation.

FH… I just want to know if interest rates have peaked?

Now investing is about probabilities and not binary outcomes.

You want to invest for a range of probabilities, not on a yes no style outcome.

But I know many of you just want a simple answer.

So gun to my head – I don’t think interest rates have peaked for this cycle.

Base case for me, would be a peak of about:

  • 4.5% on the US 10 year Treasury (give or take 0.25% either way)
  • 4.0% on the Singapore 10 year Government Bond (give or take 0.25% either way)

Singapore Savings Bonds track the average 10 year Singapore Government Bond yield for the previous month.

Which means peak for this cycle on the Singapore Savings Bonds would be 3.5% – 4.0%.

At 3.26% over 10 years, we’re definitely on the lower end of the range.

Will I still buy Singapore Savings Bonds?

If you’re deciding whether to buy Singapore Savings Bonds, do know that there is very, very serious competition coming from Fixed Deposit and T-Bills

Fixed Deposit is very attractive for short term holdings (up to 4.00%)

A 6 months fixed deposit with CIMB yields up to 4.00% interest rates.

Fixed Deposits are SDIC insured, so risk free up to $75,000.

This is very attractive, especially when you compare with the Singapore Savings Bonds first year interest rate of 2.95%

If you prefer a local bank, you can get 3.85% with UOB for 6, 10 or 12 months tenor.

Again, very attractive.

T-Bills are worth considering too (3.9%)

At the same time – the latest 6 month T-Bills are going for 3.9%.

Singapore Savings Bonds does have its advantages

So if you plan to hold the Singapore Savings Bonds for less than 1 year, you actually can get much higher yields using Fixed Deposit or T-Bills.

That said, the key advantage of Singapore Savings Bonds lies in 2 areas:

  1. Liquidity
  2. Option to hold up to 10 years


With Singapore Savings Bonds, you can redeem the money any time, and you get back your principal (plus accrued interest) on the first business day of the next month.

If you need the cash, that’s a god send.

With T-Bills it’s very hard for a retail investor to exit the position before maturity.

With Fixed Deposit it’s possible (at the discretion of the bank), but you will pay a penalty in the form of lower interest.

So if you value the liquidity, Singapore Savings Bonds are a good choice.

Option to hold up to 10 years

Don’t underestimate this one.

Sure, I know how there’s a lot of talk about how this is a decade of secular inflation, and how interest rates are going to stay high this decade.

I myself subscribe to this view.

But could I be wrong?


Singapore Savings Bonds give you protection against that.

In the even that I’m wrong and the Feds cut interest rates back to 0% in 2023.

Having the option to hold these Singapore Savings Bonds for 10 years, and yielding 3.27% over 10 years, is not too shabby.

So Singapore Savings Bonds give you that optionality.

If interest rates go up, you can just redeem 1 month later.

If interest rates go down, you can hold for 10 years.


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I will still be buying Singapore Savings Bonds

The way I see it, I still value liquidity highly in this climate, given elevated macro risk.

But once I have my minimum liquidity set aside, I don’t mind locking the money up for higher interest rates.

So my priority is:

  1. High Yield Savings Account for instant liquidity (eg. DBS Multiplier, UOB One, Trust Bank – whatever floats your boat)
  2. Singapore Savings Bonds for liquidity of up to 1 month away
  3. Rest into a mix of T-Bills / Fixed Deposit for higher yield, while sacrificing liquidity

Right now I still have about $100,000 in Singapore Savings Bonds from 2019.

Even though we are into the 4th / 5th year, they are only yielding about 2.05% – 2.12%:

So for me, it still makes sense to redeem those 2019 Singapore Savings Bonds, and refresh them into the latest SSBs are 2.95% yield.

T-Bills or Fixed Deposit doesn’t really work for this money because I do want the liquidity, and the option of getting the money back to deploy into markets quickly.

But that’s just me…

For investors choosing between Singapore Savings Bonds, T-Bills and Fixed Deposit.

I suggest to answer 2 questions:

  • How long do you plan to hold?
  • Do you need the liquidity?

And then you maximise the yield.

If you need the liquidity…

If you think you may need the cash soon you probably want to go with a high yield savings account, Singapore Savings Bonds, or Fixed Deposit depending on how quickly you need the cash.

A savings account gives you instant liquidity.

Singapore Savings Bonds takes up to 1 month to get the cash back.

Fixed Deposit – whether you can get the money back is at the discretion of the bank, may require a trip down to the bank, and has possible penalties if you break early.

So pick accordingly.

If you don’t need the liquidity…

If you don’t need the cash soon, and don’t mind locking up the money for 6 months, then you go with T-Bills or Fixed Deposit.

My personal view is that Fixed Deposit is superior to T-Bills at the same interest rate because with Fixed Deposit you have the possibility of withdrawing any time, and you don’t need to bother with allocation amounts or auction mechanics.

And as long as you go under the $75,000 cap there is no risk of default.

So to me – T-Bills only make sense if they are offered at an interest rate that is higher than what Fixed Deposits can give you.

If you plan to hold long term…

And if you plan on holding long term – think years, not months.

Then with Fixed Deposit or T-Bills, you’re only going to be locking up to 12 months (maybe 18) realistically.

Whatever interest rates you get after that, will depend on where interest rates are.

Sure it may go up, but it may also go down.

Not an easy call.

Is that a risk you are comfortable with?

How popular will these Singapore Savings Bonds be?

I’ve extracted the allotment and application data for the Singapore Savings Bonds below.

You can see that ever since the interest rates started going up in June 2022, allotment has fluctuated between $9,000 and $42,000:

While the exact application amount bounces around quite wildly depending on how attractive the interest rates are.

Given that the first year interest rates for this Singapore Savings Bonds is sub 3% (2.95%), I have a feeling they might prove quite unpopular.

This looks a bit like the October Singapore Savings Bonds, which saw allocation of up to $42,000:


I might actually increase the amount of Singapore Savings Bonds I apply for

So given that I have about $100,000 worth of Singapore Savings Bonds from 2019 that I need to refresh.

I might actually increase the amount of Singapore Savings Bonds that I apply for this month.

I’m hoping they prove unpopular with investors, and we see a higher allotment rate.

So I can refresh a big chunk of my 2019 SSBs at one go.

You can Redeem and Apply for Singapore Savings Bonds the same month

Here’s a helpful tip.

Imagine you have $180,000 in Singapore Savings Bonds, and want to apply for $100,000 new Singapore Savings Bonds (maximum per person is $200,000).

You can submit a redemption order to redeem $80,000 Singapore Savings Bonds this month.

And then you are free to apply up to $100,000 Singapore Savings Bonds in the same month.

I’ve tried this before myself and it works perfectly.

Quite an efficient way to roll over your Singapore Savings Bonds without losing any interest.

Application Timeline for January Singapore Savings Bonds

Application timeline is set out below, don’t forget to apply by 9pm on 27 December:

FAQs from the media… Singapore Savings Bonds vs T-Bills

Separately… I was asked to comment on the attractiveness of T-Bills vs Singapore Savings Bonds recently.

I thought the questions posed were frankly quite good.

So I’ve extracted the questions, and my responses, below.

Hopefully this gives you additional colour into the difference between the two instruments, and my general thought process:

Why have the yields of the past two T-bill auctions been dropping after it hit a record high of 4.19%, especially since the US Fed has continued on its rate hiking cycle?

Likely to be a combination of 2 reasons:

  1. Possible increased retail investor demand. Retail investors who want to get full allocation may submit lower competitive bids (especially for those using CPF-OA to purchase T-Bills – who need to go down to the bank to apply, and don’t want to make a wasted trip). This could skew yields lower.
  2. Since the latest US CPI print in early November came in below expectations, market has started to price in a more dovish Fed. So interest rates have come down quite a bit since early November, and you see this reflected in global interest rates. So for Singapore interest rates to come down slightly is not unexpected.

Subscription numbers are also down for both SSBs and T-bills. Are they losing their allure?

One possible reason could be that much of the liquidity from retail investors has already been deployed. Which leaves less liquidity to go into the new SSB/T-Bills.

Another reason is that fixed deposit interest rates have gone up quite a bit the past few months, and you can get up to 3.85% on a 6-month fixed deposit with UOB today.

That’s higher than 1-year SSB yields, and very competitive with T-Bills.

And with Fixed Deposit you don’t have to worry about allotment limits, competitive vs non-competitive bidding, and you can put the money in any time with very little uncertainty.

So it’s possible a lot of the money has moved into alternatives like Fixed Deposit.

I myself decided to put some cash into the UOB Fixed Deposit this week instead of T-Bills.

Is it still worthwhile to invest in T-bills and Singapore Savings Bonds?

Both are quite different products.

T-Bills have high short-term yields, but at the expense of liquidity (not easy to sell before maturity, as a retail investor).

They’re a good way to benefit from high short term interest rates, for investors who don’t need the money recently.

Singapore Savings Bonds can be redeemed easily (get your money back at the start of the next month), and can be held for up to 10 years. But the short-term yields are not so good.

They’re good if you want the option to get the money back any time, while also being able to hold up to 10 years – and still getting decent interest rates.

So it’s really up to each investor to decide what’s the right balance between yield (returns) and liquidity.

I would say both have a place in a Singapore investor’s portfolio, together with Fixed Deposits.

What is your investment strategy re Singapore government securities?

I value liquidity a lot in this climate, given elevated macro uncertainty.

So I am still applying for my maximum allotment of Singapore Savings Bonds each month.

I like Singapore Savings Bonds because I can get the money back very quickly (start of the following month), to the point where I am prepared to take a lower short term interest rates on them.

And worst case if interest rates drop drastically next year, I always have the option to hold for up to 10 years.

After that, it’s really choosing between T-Bills and Fixed Deposit.

T-Bills are hard to exit before maturity for retail investors, so to me they only make sense if they offer a good interest rate premium over Fixed Deposits.

With latest T-Bills at 3.9%, I can get 3.85% on UOB’s 6 month Fixed Deposit.

And with a Fixed Deposit I don’t have to worry about bidding, auction mechanics, allotment etc. And I can deploy it immediately, without having to wait for the next auction (opportunity cost of the money).

So Fixed Deposits are quite competitive vs T-Bills right now, unless we see T-Bill interest rates go up again.

I myself decided to put some cash into the UOB Fixed Deposit this week instead of T-Bills.


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