2 min read

Singapore banks attract deposits with higher interest rates

With local banks rising rates, bank deposits are now attractive again.

We've seen in recent weeks a number of our local banks have made it more attractive to deposit with them.

For the 3 local banks - DBS, OCBC and UOB - conditions like salary credit and spending apply to qualify for the higher interest rates so take the headline interest rate claim with a pinch of salt.

The November issuance of Singapore Savings Bonds offer an attractive 3.47% average return for 10 years, or 3.26% for the 1st year. However, recent application rounds have a cap of around $10,000 per applicant so those with large pots of savings may not be able to fully utilize the allotment.

Fixed Deposit rates have also trended up - based on MoneySmart's recent compilation for October, it's lower than what SSBs can offer, and come with a lockup of 12 months.

Fixed Deposit rates for Singapore banks. Source: Moneysmart

The other safer option is opt for Singapore government Treasury Bills (or T-Bills), which are either 6-month or 12-month in duration - super short tenure - which beat most banks FD rates while being extremely safe as their value is guaranteed by the Singapore government.

Are inflation and interest rates peaking?

We are also seeing initial signs of inflation peaking - the most recent inflation report showed that US inflation slowed again last month since it hit a peak of 9.1% in June 2022.

With slower inflation, it may calm the Federal Reserve's path of aggressive hikes in interest rates. The equity market has already responded swiftly by rebounding from the lows last week, reflecting the reality that interest rates raises may either slow or come down altogether.

What this means for you if you believe inflation may have already peaked:

  • Lock in high interest rates for longer periods - SSB, FD, T-Bills etc over liquid cash management or bank deposits which may be revised downwards quickly
  • Equities may rebound quickly - ensure you are not caught out of position or uninvested

Personally, at this stage given the oversold conditions in most financial assets, I'd prefer to be in equities, bonds and REITs over cash.


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