Singapore Savings Bond (SSB) on high
One man’s poison is another’s meat. The interest rate hikes by US Federal Reserve has rattled global stock markets. In June 2022, inflation in US rocketed to 9.1%, the highest in 40 years. Due to this, the market is fearing another interest rate hike of 75 basis points, potentially sparking a flight to safety among investors. While investors are fleeing from the stock market, demand for Singapore Savings Bond had reached record high.
Singapore Savings Bond (SSB) was launched by the Monetary Authority of Singapore (MAS) in 2015. The bond is designed to be a safe and flexible investment product that allows Singaporeans to meet their savings and investment needs. Though SSB is structured as a bond, the product has some features that make it more like a fixed deposit because of its liquidity. The distinctive feature of SSB is that the interest rate increases the longer you hold, with a 10-year maturity.
In the initial years, the demand for SSB had been lacklustre. When it was launched in October 2015, a total of $1.2 billion worth of SSB was offered but only $418 million was sold. The effective return per year for the initial batch was 2.63%, which was quite decent if you asked me. Since the launch batch, the demand has dropped consistently to a low of $13.7 million in November 2016 (effective return per year was 1.79%).
However, demands for SSB returned in full force when US Federal Reserve hiked interest three times (25 basis points each) in 2017 and four times (25 basis points each) in 2018. During that period, the average applied SSB was between $300 million to $500 million. With the rising demands, MAS also increased the offered amount gradually from monthly $150 million to $300 million. Interestingly, the average effective return did not jump significantly, averaging about 2.2% to 2.4%.
This time round, history repeats itself. US Federal Reserve resumes its rate hikes and SSB returns soar again. In fact, the 10-year average return of SSB for the August issue stormed to 3%, a record high since its inception. For the July issue, MAS increased the offered amount to $600 million. But that was not enough to meet the sky-high demand, which soared to a record $1.3 billion.
In this article, I will share my insights on how Singapore Savings Bond can play a part in strengthening your wealth portfolio through passive income. In this article, I will be sharing my SSB portfolio as well.
My SSB portfolio
I started contributing to SRS only in 2019. In my previous article, I have also shared the strategy of using SRS to purchase SSB. To put money where my mouth is, I have applied for the July SSB. Prior to this, I had purchased two tranches of SSB using cash in 2018. Below is the breakdown of my SSB investments. [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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