10-year average return on Singapore Savings Bonds hit new year-to-date high of 3.4%

INTEREST rates on the latest issuance of Singapore Savings Bonds (SSBs) have risen again, as yields on the bonds have continued to climb in recent months.

The latest tranche, which opened on Wednesday (Nov 1) and will be issued in December, is offering a first-year interest rate of 3.3 per cent, and a 10-year average return of 3.4 per cent.

The 10-year average return of 3.4 per cent is the highest offered for issuances in 2023.

Interest rates for the SSBs have been on the rise for the past five tranches. In the previous tranche that was to be issued in November, yields hit 3.32 per cent, which was then a year-to-date high.

The total amount applied for in the November issuance was also the highest for this year, at S$1.2 billion, for the S$1 billion on offer.

SSBs take their interest rates from the average yields of Singapore government bonds from the month before. But they are subject to adjustments, to ensure that interest rates do not dip over time when the yield curve is inverted – which is when yields of short-dated bills exceed those of longer-dated bonds.

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The government may make adjustments to ensure that returns do not step down before the SSB matures, so as to provide investors with a return that increases across their holding periods.

The announcement of the latest tranche of SSBs comes ahead of the next Federal Open Market Committee (FOMC) meeting in the US on Wednesday. Markets expect the US Federal Reserve will keep interest rates at current levels, although they noted that there is still room for further hikes.

The latest December issuance has some S$1 billion on offer and closes on Nov 27. It will be allotted on Nov 28; successful applications will be issued on Dec 1.

The 10-year average return on SSBs reached a historic high of 3.47 per cent in December 2022.