SINGAPORE - The December tranche of Singapore Savings Bonds (SSBs), which opened on Tuesday, is offering an all-time-high interest rate, according to data by the Monetary Authority of Singapore.
The first-year interest rate starts at 3.26 per cent and the rates increase every year, in line with the aim of having SSBs as a long-term savings instrument that yields higher returns the longer an individual saves.
If the December SSBs are held for 10 years to maturity, the average return is 3.47 per cent.
Quick calculations show that a person who is allotted $10,000 worth of December’s SSBs will earn $326 if he decides to redeem his savings bonds a year later. If he holds the bonds for 10 years to maturity, he earns $3,486.
The returns for the December tranche of SSBs surpass November’s issue, which have a first-year interest rate of 3.08 per cent and a 10-year average rate of 3.21 per cent.
In view of their growing popularity, the Government has also raised the amount of SSBs on offer in December by $100 million to a total of $1 billion.
The November tranche was 2.4 times subscribed and the cut-off level was $10,000 – the second lowest since $9,000 in August.
The cut-off level gives an indication of the amount worth of savings bonds each person is allotted.
If a person applies for savings bonds equal to or less than the cut-off amount, he will get the full amount he applied for.
If he applies for more than the cut-off amount, he will either get the cut-off amount or $500 more than the cut-off amount.
SSBs are issued over a 10-year tenor but investors can redeem the bonds in any given month with no penalty for exiting early.
They will get back their principal amount plus pro-rated interest upon redemption.
Applications for the December tranche began at 6pm on Tuesday and will close at 9pm on Nov 25. The SSBs will be allotted on Nov 28 after 3pm, and all successful applicants will get their SSBs on Dec 1.
Yields on SSBs and other Singapore government securities such as Treasury bills (T-bills) have been rising in line with the rising yields in the United States.
Last week, an auction of six-month T-bills hit a record-high cut-off yield of 4.19 per cent a year.
The benchmark 10-year US Treasury yield is hovering near 4 per cent, while the two-year yield, which is the most sensitive to interest rate policy, has gone past 4 per cent.
Investors were looking ahead to the Federal Reserve meeting on Tuesday and Wednesday, where the US central bank is expected to hike interest rates by 0.75 per cent, its fourth hike of such magnitude.