Singapore Savings Bond 2019 Jan 2.90%pa – Should You Buy?

Singapore Savings Bond 2019 Jan offers investors 2.01% to 2.90%pa interest, or an annualised 2.45%pa over 10 years.

2 key developments have shaped bond markets since Nov 2018. And they both point to lower interest rates, higher bond prices.

First, US Federal Reserve Chief Jerome Powell suggested that the rate hikes may slow, causing bond yields to fall. You can read his full comments made on 28 Nov here. That was a departure from the hawkish tone the central bank had maintained while accelerating rate hikes throughout this year.

Second, the US yield curve inverted for the first time since a decade on 4 Dec. The yield spread between 3 and 5-year treasuries turned negative. The yield curve had been flattening for some time in 2018 but an inversion is more serious; it points to a coming recession. Another important implication is that short term yields may rise while long term yields continue their fall.

In view of flattening or inverting yield curves, does that mean you should invest in Singapore Savings Bond 2019 Jan to lock in better rates? Is this an opportune time to accumulate SSB?

You might also want to know if SSB Jan 2019 is a good bond for your portfolio? How do the interest rates compare to other bonds and fixed income products?

You will find some answers to these questions in the analysis I provide below. Hope that they can help you make a more informed decision on Singapore Savings Bond 2019 Jan.

Summary of Singapore Savings Bond 2019 Jan

First, here’s a quick low-down of all you need to know about SSB Jan 2019 so that we are on the same page when discussing about these bonds.

  • Bond ID: GX19010T
  • Bond yield: 2.01% to 2.90%pa
  • Interest payment dates: 1 Jul, 1 Jan every year
  • Tenor: 10 years (Issue date: 2 Jan 2019, Maturity date: 1 Jan 2029)
  • Tranche size: S$300 million
  • Issuer: Government of Singapore

Timeline You Must Know

You can start applying for this bond through POSB/DBS, OCBC, UOB ATMs, internet and mobile banking platforms from 3 Dec 2018. Singaporeans, PRs and foreigners can apply for the Singapore Savings Bonds. You will need to be above 18 years old and possess a Central Depository (CDP) Account.

  • Deadline for application: 26 Dec 2018 9pm (do not miss this deadline!)
  • Allotment results: 27 Dec 2018 after 3pm

How Does Singapore Savings Bond 2019 Jan Compare with Other Fixed Income Products

Let’s compare the interest rates offered by Singapore Savings Bond 2019 Jan with yields from other fixed income products. The charts presented below consist of data dated 4 Dec. They have been pieced together with information that I scour monthly throughout the bond markets.

Singapore Savings Bond 2019 Jan vs SGS Bonds

It is clear that SSB Jan 2019 offers higher yields than SGS bonds for all maturities besides Year 1. If you have been following my blog and read my post on Singapore Savings Bond Dec 2018, you will know that this was not the case last month – SSB and SGS yields were very similar.

Singapore Savings Bonds 2019 Jan is a clear winner this month. Its rates are around 10bp higher than current SGS bond yields. And these SGS bond yields are only going to trend lower because of the 2 key developments I discussed at the start of this article.

(Note that data for SGS bonds are dated 4 Dec so you need to update your analysis accordingly as SGS bond yields may have changed)

*Phone users: Please rotate screen to landscape to see full chart (Bug fix is on the way)

Singapore Savings Bond 2019 Jan vs Fixed Deposits

In the chart below, you will find a very relevant analysis that compares SSB Jan 2019 with Fixed Deposit interest rates offered by main banks in Singapore. A total of 7 banks and 11 fixed deposit products are presented here (DBS, OCBC, UOB, SCB, Maybank, RHB, Hong Leong). To see the same chart for last month, refer to my blog post on Singapore Savings Bond Dec 2018.

The winner is obvious: Singapore Savings Bond 2019 Jan. SSB Jan 2019 offers 2.01% interest rate for the first year whereas the highest yield offered by all 11 fixed deposits is only 1.90%. This rate is offered by CIMB for a 1 year maturity fixed deposit. Here’s another advantage SSB offers: You can redeem Singapore Savings Bond with accrued interest anytime whereas you will lose the accrued interest if you terminate a fixed deposit prematurely.

You will also find the interest rate data used in the chart presented in a table form right after the chart below.

*Phone users: Please rotate screen to landscape to see full chart (Bug fix is on the way)

Singapore Savings Bond 2019 Jan vs S$ Retail Bonds

Here, we see something different. SSB Jan 2019 still has lower interest rates than all other listed corporate S$ bonds. It is natural as Singapore Savings Bond is Singapore Government backed and it is as good as being default risk-free. All other corporate bonds should offer higher interest rates to compensate investors for accepting default risk.

(To see the same chart for last month, refer to my blog post on Singapore Savings Bond Dec 2018.)

My point here is not to say the obvious but to highlight a few corporate bonds that are worth considering.

1. Temasek Bond T2023 2.7% with 5-year maturity. It was priced at 2.31% yield as of 4 Dec. If you want to invest a large amount (say >S$100,000), then you will find it difficult to do so with Singapore Savings Bond as there is a investment cap and oversubscribed issues are subject to ballot and reduced allotment. Temasek Bond T2023 can help breach this gap as it can be purchased on SGX in any quantity as long as there is market liquidity. You can read more about this bond in my blog article for its issuance.

2. CapitaMall Trust, Frasers Centerpoint and Astrea IV bonds are suitable bonds for consideration if you wish to accept more risk for a better interest rate return.

*Phone users: Please rotate screen to landscape to see full chart (Bug fix is on the way)

BondMaturity (Years)Yield (%pa)
Oxley 1911050.926.36
Aspial B2004011.336.09
Perennial 2004291.404.25
Oxley 2005181.457.22
Aspial B2008281.736.81
CapitaMall Trust2.222.34
Frasers Centrepoint3.473.40
Temasek 2310254.892.31
Astrea IV 2806149.533.50

 

Singapore Savings Bond 2019 Jan Vs Previous SSB Issues

Now that we have looked at the attractiveness of SSB Jan 2019 compared to all other fixed income investment choices in the market, you should also see how this month’s issue compares with previous SSB issues. You will have a better visualisation of how SSB rates have been trending and how they might trend in the near future. (To see the same chart for last month, refer to my blog post on Singapore Savings Bond Dec 2018.)


SSB Yield For Last 6 Issue 201812

Short Term Interest Rates Are Excellent

The first key takeaway that you can tell from the chart above is that Singapore Saving Bond 2019 Jan offers good interest rates for Year 1. It is the highest among 6 issues, at 2.01%pa. If you have been waiting for the right SSB for short-term money fund, this is a great time to invest.

Medium-to-Long Term Interest Rates Are Less Attractive

The yield curve is inverting – shorter term rates are increasing faster than longer term yields. For those of you holding on to earlier Singapore Savings Bond issues, you should continue to hold them if you want to hold them for long term.

Conclusion

In my opinion, Singapore Savings Bond 2019 Jan is a good choice for those who want to deploy funds in a fixed income asset.

First, interest rates have fallen, as a result of US Fed comments on a slower pace of monetary tightening. This means that SSB Jan 2019, with locked-in rates of Nov 2018, will offer better rates than similar products such as SGS bonds valued in the market today.

Second, the yield curve is in danger of inverting, something we usually associate with a recession. This means that short term yields will keep trending higher while long term yields fall. You should park money in longer term, less risky bonds such as Singapore Savings Bond.

One problem is that the Singapore Savings Bond tend to be oversubscribed in popular months and it might happen again this month with the safe haven playbook becoming a fast-developing theme. With strong demand, you might not get the full amount that you apply for – the typical allotment starts from S$10,000. If you have excess funds that need to be deployed, you should consider alternatives such as corporate S$ bonds that I have mentioned above.

Verdict: Should Buy!

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