After waiting for 3 long quarters, retail investors can finally rejoice at what is a new year-to-date high interest rate for the Singapore Savings Bonds (‘SSB’). For SSB to be issued in the month of November 2023, the average return over 10 years is 3.32% which is the 2nd highest ever in its history. With such attractive long-term returns, Singaporeans may be enticed to part with their cash once again. In this article, I will share more about this month’s issuance as well as my own SSB portfolio and past allotment data.
Singapore Savings Bonds Nov 2023
Diagram 1 shows the interest rate for Singapore Savings Bond for the issuance month of November 2023.
I find this month’s SSB to be particularly attractive because the returns are quite smoothed out, i.e., even the initial interest rates are high to begin with. To lock in 3.21% guaranteed, risk-free interest rate for the first 6 years is music to my ears. Hard to find an equivalent financial instrument offering such comparable returns. Therefore, I am definitely participating in this month’s issuance as I see this as a good opportunity to further optimise my SSB portfolio. That’s right, I have been diligently redeeming SSB with lower coupon rates and replacing them with higher-yielding ones.
Why Heartland Boy Is Balloting for SSB Nov 2023
As shown in Diagram 2, I have successfully replaced earlier SSB tranches that were yielding 2+% with tranches offering a minimum of 3% interest rate. For each time I do this, I pay a $2 transaction fee (one-way) but this is more than offset by the higher interest rates that I will be receiving. If I am successful in adding SSB Nov 2023 into my investment portfolio, it will improve my portfolio’s overall yield. But by how much is up to anyone’s guess as I expect competition to be stiff this month.
Past-Year SSB Allotment Outcome
With reference to Diagram 3, retail investors would have been able to obtain the amount bidded for the past 6 issuances, subject to an individual’s maximum holding of $200,000. That is because these tranches were undersubscribed. I expect this month’s SSB to be oversubscribed as what happened to SSB Dec2022 should provide investors with a good clue. For that specific issuance, the amount offered for auction was $1 billion which is the same for November 2023. Cut-off allotment was $14,000 then.
If I were to hazard a guess, I anticipate cut-off allotment to be at least $20,000. This is much higher than December 2022 because of the following reasons:
- Latest cut-off yield for 6-month T-bills was 4.07% which would have attracted plenty of hot money, and
- Recent under-subscription for SSB seemed to suggest that demand for this product had waned.
This will also be the approximate range that I will be tendering for as I took advantage of the recent upturn in oil and energy prices to pare down my holdings in Rex and Geo Energy which resulted in a slight increase in my cash holdings. Finally, I will also wait till it is close to the application deadline of 26 October before applying so that I minimise the opportunity cost.
I see Singapore Savings Bonds as a good financial instrument alongside high-yield savings accounts. My objective is to max out the individual limit during this cycle of high interest rates. When we enter into the next cycle of low interest rates (trust the Americans to print more money for the next recession), a risk-free portfolio yielding 3+% annually will not look too shabby then. Therefore, buying SSB now is a long-term play because there are better alternatives for those with shorter investment horizon.
This article is published on 8 October 2023.
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