10-year average return on Singapore Savings Bond picks up to 2.81%

INTEREST rates on the latest issuance of the Singapore Savings Bond (SSB) have risen, after the November tranche saw yields slip to record lows for 2024.

The latest tranche, which opened for application on Friday (Nov 1) and will be issued in December, is offering a first-year interest rate of 2.66 per cent, and a 10-year average return of 2.81 per cent.

This 10-year average return of 2.81 per cent is the highest offered since the September issuance.

Interest rates for the Singapore government-backed bonds have slipped in the past two tranches. In the November issuance, yields fell to 2.56 per cent. It received applications of S$99.6 million for the S$600 million on offer.

The latest issuance has S$600 million on offer and closes on Nov 26. It will be allotted on Nov 27; successful applications will be issued on Dec 2.

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 toprovide investors with a return that increases across their holding periods.

The latest tranche of SSBs comes ahead of the Federal Open Market Committee meeting in the US next week.

In September, the Federal Reserve pencilled in 50 basis points of cuts over the two remaining rate decisions this year, suggesting either another large cut, or two smaller cuts of 25 basis points each.

All the economists surveyed in a recent Reuters poll expect the Fed to cut its key interest rate by 25 basis points at the upcoming meeting, with more than 90 per cent predicting the same move in December.