Singapore Savings Bonds vs Singapore Fixed Deposits


Singapore Savings Bonds vs Fixed Deposits

Singapore Savings Bonds

The latest issue of Singapore Savings Bonds (SSBs) have average yields of 1.00% per annum for a 1 year holding period and 2.32% per annum for a 10 years holding period. The minimum investment is $500 with a maximum holding of $100,000 at any point of time. The holding period for SSBs can be up to 10 years with investors being able to redeem their bonds at any point in time without any penalty. The sum invested is guaranteed by the government with no risk of loss of capital. Investors can apply and invest in SSBs from 7 a.m. to 9 p.m. Monday to Saturday excluding Public Holidays at ATMs and DBS online banking every month. Visit Singapore Savings Bonds website to get the most up-to-date information about the latest issue of Singapore Savings Bonds.

Average Yield for 10-Years SSBs for Past 12 Months

May 16 Jun 16 Jul 16 Aug 16 Sep 16 Oct 16
1.94% 2.06% 2.03% 1.75% 1.79% 1.79%
Nov 16 Dec 16 Jan 17 Feb 17 Mar 16 Apr 16
1.87% 2.18% 2.44% 2.38% 2.27% 2.32%

Future Direction of Yields for SSBs

Returns for SSBs matches the returns for Singapore Government Securities (SGSs) of the same holding period at the time the SSB is issued. The yields of SGSs have been trending down due to SIngapore's position as a safe haven for investors in times of financial volatility. Hence, each newer issue of SSBs every month has seen their yields decrease to match the lower yields in SGSs.

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Singapore Fixed Time Deposits

Singapore Fixed Time Deposits offer depositors deposit rates of around 1.00% to 2.00% per annum for tenures of anywhere between 3 to 24 months since 2002. Minimum deposit varies widely but is usually around $20,000. Banks usually do not offer fixed deposits for tenures above 24 months and even if they do, the deposit rates are usually uncompetitive. Withdrawal of fixed deposits before the tenure is up will result in penalties such as depositors forgoing the interest, returning of promotional gifts or even paying a stated penalty. All deposits in Singapore including fixed deposits are insured by the Singapore Deposit Insurance Corporation for a sum of up to $50,000. Depositors can open a fixed deposit account anytime at any bank branches and even through online banking for certain banks.

Future Direction of Fixed Deposit Interest Rates

Fixed deposit interest rates was trending higher ever since US Federal Reserve halted its quantitative easing policy in 2014. In fact, promotional fixed deposit interest rates have hit as high as 2.00% per annum in the begining of 2016, a level not seen since 2002. However, the rising trend in fixed deposit interest rates has eased dramatically in recent months due to anticipation of low interest rates in future. Interest rates are likely to stay low even as the Federal Reserve continues its policy of raising interest rates, abeit at a very slow pace.

Singapore Savings Bonds vs Fixed Time Deposits

A quick look at Singapore Fixed Time Deposits will show that most banks can offer slightly higher fixed deposit rates as compared to the 1.00% per annum that SSBs yield if your holding period is 1 year. However, if your holding period is for the full 10 years, SSBs average yield of 2.32% per annum is higher than Singapore Fixed Time Deposits assuming you renew your fixed deposits at current interest rates everytime their tenure is up. This makes SSBs more attractive to long term investors/savers who also want to save the hassle of renewing their fixed deposits at various banks everytime their fixed deposits tenure is up.

Investors/savers will do well to take into account that the yields of SSBs and Fixed Deposit rates are on a downward trend and are usually highly correlated.

With a minimum purchase of $500 and a maximum holding of $100,000 worth of SSBs at any point of time, SSBs are quite restrictive for savers who want to park more than $100,000 in a safe investment. They are however ideal for Singaporeans who have less than $100,000 and are looking to growing their money instead of leaving them in saving accounts.

SSBs are extremely liquid as they can be redeemed anytime and the capital will be back in the investor's account within a month without any penalty. Comparatively, depositors incur a penalty when they withdraw a fixed deposit before its tenure is up. Both SSBs and fixed deposits are extremely safe with loss of capital extremely unlikely even in the event of a financial crisis.

Keep your Fixed Deposits and Buy Singapore Savings Bonds

Singapore Savings Bonds can cover the needs of most Singaporeans who want to save for the long run and it makes sense to invest in it as an alternative product to short term fixed deposit that banks can offer currently. Investors/savers will get more certainty of the interest rates over the course of 10 years if they purchase SSBs as compared to fixed deposit interest rates which fluctuate with market conditions. However, fixed deposits are more flexible as savers can deposit in excess of $100,000 and has slightly higher rates in the short term. Having said that, SSBs will provide a competitive product to fixed deposits for depositors and it is a win-win situation for Singaporeans who have more options on how to best save their money so as to get higher returns.


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