Singapore Savings Bond interest rate curve flattens further; 10-year average return at 2.81%

THE interest rate curve on the latest tranche of the Singapore Savings Bond (SSB) has flattened further.

The June issuance, which opened on Tuesday (May 2), is offering a first-year interest rate of 2.81 per cent, and a 10-year average return of 2.81 per cent. (*see amendment note)

In comparison, the May issuance was offering a first-year interest rate of 3.03 per cent and a 10-year average return of 3.07 per cent.

SSBs take their interest rates from the average yields of Singapore government bonds from the month before.

They are subject to adjustments, however, 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.

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

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The June issuance has some S$700 million on offer and closes on May 26. It will be allotted on May 29, and successful applications will be issued on Jun 1.

SSBs drew strong investor interest last year, as their coupon rates rose alongside rising interest rates. But interest has waned in recent months, as yields also dipped on lower rate hike expectations.

For May’s SSB issuance, S$697.2 million was applied within individual allotment limits and allotted for the S$700 million on offer.

*Amendment note: This story has been amended to correctly reflect the 10-year average return.