Singapore Savings Bond opens for February issuance with interest rates under 3%
Tay Peck Gek
THE interest rates for the latest Singapore Savings Bond (SSB) have further slipped to 2.84 per cent for the first year and 2.97 per cent for the 10-year average, even as other short-term market investment products offer yields of around 4 per cent.
The Monetary Authority of Singapore (MAS) website showed that the 10-year bond for retail investors opened on Tuesday (Jan 3) for issuance in February, offering interest rates much lower than its recent tranches.
The last issuance has a first-year and 10-year average returns of 2.95 and 3.26 per cent, respectively, while the corresponding interest rates for the December tranche are 3.26 per cent and 3.47 per cent.
The interest rates for the first two years of this tranche should have been much higher at 4 per cent and 3.15 per cent (instead of 2.84 per cent), if not for the government’s adjustments to provide stepped-up returns over the risk-free fixed income security’s 10-year tenor. S$700 million is on offer for this tranche, and applications close on Jan 26.
SSBs take their interest rates from the average yields of Singapore government bonds from the month before. They are, however, subject to adjustments to ensure that interest rates do not dip over time for inverted yield curves, in which the yields for short-dated bills exceed those of longer-dated bonds.
The December bond yield curve was inverted, leading to the present SSB’s interest rates for the early years being adjusted lower, with the average yield of 2.97 per cent on the 10-year government bond in December serving as the ceiling.
With market products such as Treasury bills and fixed deposits offering higher interest rates of about 4 per cent, it is expected that demand for the February SSB will fall.
