This August's SSBs, with codename SBAUG22 GX22080V, are yielding an average of 3% over the next 10 years, yielding higher than July's offering as we have predicted as interest rates have not peaked.
The interest rate each year is as follows:
- Note that the interest rate starts at 2% for the 1st year and rises to 3.29% in the 10th year
- The average is ~3%, which is higher than CPF OA (2.5%) and current FD rates and bank cash deposit rates
The issue details are as follows:
Singapore Savings Bonds offer an almost risk-free, liquid alternative to cash with a higher interest rate. They can be redeemed at face value at any time, with roughly about one month's lead time to receive the actual cash in your bank account.
Compared to current bank rates which still have not kept up with rising global interest rates, lending money to the Singapore government offers a good alternative to keeping your money in your bank account. However, there is a limit of $200,000 for each individual.
Read more about how we manage cash in the below article.
As previously mentioned, SSB rates will continue to trend higher as US inflation has not peaked and the US Federal Reserve continues to raise rates to combat high inflation rates.
Therefore, it's advisable to ladder into SSBs. For example, if you wish to deposit $100,000 into SSBs, then you could deploy that over six months as follows:
- Month 1: $15K
- Month 2: $15K
- Month 3: $15K
- Month 4: $15K
- Month 5: $20K
- Month 6: $20K
*Application fee is $2 each time
Because SSB also pays interest every 6 months, laddering your deposit as above will allow you to receive interest every month.
It's also worth noting that the yields on SSBs do not beat inflation, and merely offer a higher interest-earning liquid alternative to cash sitting in the bank. Unless you have a short-term need for cash, they should be invested.
To apply for SSBs, check out this MAS guide. You'll need a CDP account so interest payments can be credited directly into your bank account. There is an issuance limit of S$700m for this month's SSB.
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