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Singapore Savings Bond short term more rewarding.

Saturday, January 20, 2018

Many readers asked me about Singapore Savings Bond recently and apparently it is because the coupon is now 1.55% for the first year which is much higher than what any local bank I know would pay for a 1 year fixed deposit.

I was not interested in the Singapore Savings Bond for various reasons and to avoid repeating myself, if you are not familiar with the reasons, please read the following blog (plus details on eligibility and mechanics):

Singapore Savings Bond: Good or bad?

When I blogged about the bond in the middle of 2015, the bond's coupon for the first year was 0.9%.

At that time, we could get 1.45% interest for a one year fixed deposit easily.

The Singapore Savings Bond was unattractive for money in my emergency fund and war chest, therefore.

Interest rates for one year fixed deposits have declined although I am puzzled why they would because with interest rates on the rise, short term interest rates should be impacted first.

Singapore Savings Bond's coupons.

Whatever the reason, the lower interest rates offered by local banks for one year fixed deposits make the Singapore Savings Bond's 1.55% coupon for the first year more attractive.

So, what to do?

I am going to have some of my war chest money in this bond.

Closing on 26 Jan at 9pm.

I am going to think of this as another fixed deposit.

With the higher coupon for the first year, having some money in the Singapore Savings Bond now gels more with my methods.

Taken from DBS internet banking.

Application or redemption is also very easy because they made it available through internet banking.

Very good for lazy AK who doesn't want to leave home to queue at an ATM.

Related post:
Use fixed deposits (FD) for emergency fund and war chest. (And now we say SSB too.)


K said...

Hello AK,

Did you notice that for the SSB that was issued for this month (Jan), the interest payable for the bond is higher from the 3rd year onwards compared to the bonds issued for next month (Feb). But since it can be redeemed anytime without penalty, it does not really matter to you. I am just curious whether you know why this is the case.


Serendib said...

alamak, now with ASSI mentioning this I'm worried the Feb issue will be oversubscribed (Just kidding)

AK71 said...

Hi K,

It is a curious thing, isn't it?

I expect the coupons to rise for longer periods in future.

Higher short term interest rates would probably trickle to the longer term interest rates eventually.

AK71 said...

Hi Serendib,

Unfortunately, everyone is allowed to hold a maximum of only $100K in SSB. :(

Serendib said...

Hi AK, what I meant is that each issue also has a limited amount (this time it's $150m), and from what I can see historically the demand has never matched this limit. But maybe this time it will (even though each person can only apply for max $50k of this issue) and applicants will receive a small amount of bonds than they've applied for! =)

AK71 said...

Hi Serendib,

Ah, I see what you mean.

It could happen, of course, but if it does happen, I am sure it has nothing to do with my blog.

It would be terrible to have my blog gazetted. -.-"

Nick said...

AK thanks to your blog, the Singapore Savings Bond to be issued on 01 February 2018 was oversubscribed!

Maximum Amount Offered: SGD 150,000,000
Total Amount Applied : SGD 171,910,000
Within Limits : SGD 168,694,000

Applicants who applied for SGD 41,000 or lower were fully allotted, subject to the individual allotment limits. Applicants who applied for SGD 41,500 or higher were allotted either SGD 41,000 or SGD 41,500. Approximately 66.25% of these applicants were selected at random and allotted the additional SGD 500.

AK71 said...

Hi Nick,

Is this the first time that the SSB is oversubscribed?

Fortunately, I applied for less than $41,000. ;p

Pure, dumb luck, as usual. :)

AK71 said...

Reader says...
U wrote abt ssb... now oversubscribed
Lucky my app is successful.

AK says...
Alamak... BYHW... 😛
Gong xi gong xi 🙂

AK71 said...

Reader says...

Power of AK 🤣

AK71 said...

SSB May 2018 Issue:

1.65% for 1 year.

2.39% for 10 years.

csky said...

Hi AK,

Now that the interest rate is creeping up... I am wondering if it makes sense to redeem the older bonds and buy the latest bond issue?

For example, for the January 2018 issue, year 1 is 1.32%, year 2 is 1.58%.

The latest June 2018 issue, year 1 is 1.68%, year 2 is 2.14%.

The cost to apply and reedem is $4 round trip. But a 0.3% difference on $10,000 is $30. So more than enough to cover the costs. Am I missing any other costs?

But the question is... since rate will keep going up... wouldn't this be like an endless game?


AK71 said...

Hi csky,

I don't know if the rate will keep going up and if it does for how long and by how much?

In the example you have used, however, it is quite obvious that it makes sense to redeem the older bond and apply for the new one.

The larger the amount, the more it should be considered. ;)

AK71 said...

Redeeming this SSB (i.e. SBFEB18).

7 months @ 1.55% per annum is not bad for a "fixed deposit".

AK71 said...

Siew Mun Kwan says...
Now SSB first year is 1.7+%..

AK says...
So clever ;)

Siew Mun Kwan says...
I am swapping out my SBMAR18 and SBAPR18 to buy SBSEP18 and SBOCT18 respectively. 😋

AK71 said...

Reader says...
Saw ur this post on redeem old lower % SSB for new higher % SSB.
Juz FYI from my personal experience now the allocation per person SSB taper down to $12k+- each month.. so still worth it if older SSB is bigger amount but new SSB only a fraction of it?

AK says...
Can redeem partial.
Don't have to redeem full. 🙂

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