facebookSingapore Savings Bonds Interest Rate Guide: How Is the Interest Rate for the Singapore Savings Bond (SSB) Determined?

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310522 How is SSB determined

Singapore Savings Bonds Interest Rate Guide: How Is the Interest Rate for the Singapore Savings Bond (SSB) Determined?

profileMing Feng

Throughout our investment journey, it’s important to minimally beat the inflation rate when we invest. Over the years, there’s been one investment product in particular that constantly finds itself in the limelight with regard to this topic.

Can you guess which product or financial instrument is that?

Yes. It’s the humble Singapore Savings Bond (SSB)!

Ever since it was introduced on 1st October 2015, the Singapore Savings Bond (SSB) is kind of like the model student in a class of different investment products.

Think of Singapore Savings Bond as the class monitor.

While he may not necessarily be the top-scoring student, he is well-mannered, responsible, and exhibits rather predictable behaviour.


TL;DR: Singapore Savings Bonds Interest Rates Over Time

Source: MAS | Author

It is really frustrating to invest and lock in the return of SSB for a certain month, only to realise that you could have waited for one more month to get a higher return.

The same can be said for investors who are waiting for the right time to invest, only to realise that the next SSB interest rate is lower than the initial one.

While we do have an amazing hack on how you can jump on board a bond that gives you a higher interest rate, it requires time and effort to really put it into action.

Source: giphy

Wouldn’t it be better if we could understand how the interest rates of SSB are determined?

And by extension, that might perhaps, allow us to make a calculated prediction as to the interest rate of next month’s bond?


What Affects the Singapore Savings Bonds Interest Rate?

Source: Seedly Community

Warning: You are about to get your mind blown.

Source: giphy

The interest rate allocated to each month’s SSB is correlated to the long term Singapore Government Securities (SGS) yields. The yield refers to the earnings generated.

Here are four numbers you need to know in order to have an estimation of the month’s interest rate for SSB:

  • The reference yield of 1-year SGS
  • The reference yield of 2-years SGS
  • The reference yield of 5-years SGS
  • The reference yield of 10-years SGS

The reference yield, refers to the simple average of the respective daily SGS rates from the month, before the announcement of the SSB interest rate.

FYI: The SSB’s rate uses the 1,2,5 and 10-years SGS yields as a benchmark.

Singapore Savings Bond Calculator: What’s The Formula To Calculate the SSB Interest Rate?

Source: giphy

If you wish to further blow your mind, here are the formulas to calculate the interest rate for the SSB:

Source: SGS

Yeah… Some of you might be going, “What…”. While others might be more:

Source: thefunnymeme

What If The SGS Yield Does Not Allow the Interest Rate Of SSB To “Step-Up”?

Source: Giphy

And no, I don’t mean like in the movie.

We’ve all heard this quote, “Good things happen to those who wait.” And it rings true with regard to the SSB.

The Singapore Savings Bond practises a step-up interest rate, which means that the longer you stay invested in the bond, the higher the annual return.

While our SSB’s interest rate uses the 1, 2, 5 and 10-years SGS yield as a benchmark, there will be occasions when the step-up interest rate is not possible.

For those who prefer the technical explanation for this, the two types of instances are caused by the inverted yield curve and the highly convex yield curve.

Should there be an occasion where either of these ‘curves’ happens, MAS will lower the coupon rates as necessary.


Singapore Savings Bonds Interest History

While the Singapore Savings Bond has a maturity date of 10 years, you can choose to liquidate it at any point without any penalty.

To better demonstrate the changes in the interest rate of SSB over time, we did a compilation of the average returns of SSB over 10 years.

The interest rate for SSB steps up every year. This means that the longer you invest in a particular contract for SSB, the higher the interest rate.

With that, we went on to calculate the average long term returns of SSB, compiling all the bonds released from the year 2015 till today.

Singapore Savings Bonds Interest History (10 Years)

Should investors hold on to their SSB till maturity, the returns are decent, with an average return of ~1.77% p.a. This is in light of the bonds being considered close to risk-free.

Source: MAS | Author
MonthOct 2015Nov 2015Dec 2015Jan 2016Feb 2016Mar 2016Apr 2016May 2016Jun 2016Jul 2016Aug 2016Sep 2016Oct 2016Nov 2016Dec 2016Jan 2017Feb 2017Mar 2017Apr 2017May 2017Jun 2017Jul 2017Aug 2017Sep 2017Oct 2017Nov 2017Dec 2017Jan 2018Feb 2018Mar 2018Apr 2018May 2018Jun 2018Jul 2018Aug 2018Sep 2018Oct 2018Nov 2018Dec 2018Jan 2019Feb 2019Mar 2019Apr 2019May 2019Jun 2019Jul 2019Aug 2019Sep 2019Oct 2019Nov 2019Dec 2019Jan 2020Feb 2020Mar 2020Apr 2020May 2020Jun 2020Jul 2020Aug 2020Sep 2020Oct 2020Nov 2020Dec 2020Jan 2021Feb 2021Mar 2021Apr 2021May 2021Jun 2021Jul 2021Aug 2021Sep 2021Oct 2021Nov 2021Dec 2021Jan 2022Feb 2022May 2020Jun 2020Jul 2020Aug 2020Sep 2020Oct 2020Nov 2020Dec 2020Jan 2021Feb 2021Mar 2021Apr 2021May 2021Jun 2021Jul 2021Aug 2021Sep 2021Oct 2021Nov 2021Dec 2021Jan 2022Feb 2022Mar 2022Apr 2022May 2022Jun 2022
Interest Rate2.632.782.442.582.52.442.192.091.942.062.031.751.791.791.872.182.442.382.272.322.162.122.062.122.132.072.162.132.042.112.312.392.432.632.572.442.422.482.572.452.22.182.162.162.132.162.011.951.751.741.711.761.751.711.631.391.050.80.930.880.90.910.870.90.890.971.151.561.611.531.51.431.391.451.711.781.641.391.050.80.930.880.90.910.870.90.890.971.151.561.611.531.51.431.391.451.711.781.641.791.912.092.53

Are Singapore Savings Bonds Worth Buying? Singapore Savings Bonds Redemption and More

Buying Singapore Savings Bonds makes the most sense if you are looking to put your savings somewhere safe for years while at least beating inflation.

While investing in the SSB gives a return that is relatively low in comparison to some of the investment products out there such as ETFs, REITs, and certain stocks investment, there are numerous advantages to investing in the SSB.

Here are just some of the advantages which make SSBs a worthy investment:

  • Low minimum investment cost of only $500
  • Low risk since it is government-backed
  • There is no penalty for early withdrawals
  • Interest payouts are regular and on time, with zero lock-in periods.

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any investment product.

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About Ming Feng
A stint in Bloomberg gifted me with a beer belly, which only grew larger when I moved on to become a Professional Trader. Now I turn caffeine into digestible finance-related content.
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