10-year average return on Singapore Savings Bonds slides to 2.82%

THE 10-year average return for the latest tranche of Singapore Savings Bonds (SSBs) continued to fall, to 2.82 per cent, in line with rate cuts by the US Federal Reserve.

In contrast, the preceding month’s 10-year average return was 2.86 per cent.

The February tranche, which opened on Thursday (Jan 2), has a first-year interest rate of 2.76 per cent, slightly higher than the 2.73 per cent offered by the January issuance.

SSBs take their interest rates from the average yields of Singapore government bonds from the month before.

They are subject to adjustments, however, 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.

The government may make adjustments to ensure that returns do not step down before SSBs mature, so as to provide investors with a return that increases across their holding periods.

The February issuance has S$500 million on offer and closes on Jan 24. It will be allotted on Jan 27; successful applications will be issued on Feb 3.

SSB demand fell in the last few tranches, in line with declining yields.

The January tranche received a total of S$326.3 million in applications for the S$600 million on offer.

In December, the Fed lowered interest rates by 25 basis points, bringing the target interest-rate range down to 4.25 to 4.5 per cent.

However, the Fed is projected to scale back on the pace of rate cuts this year, making just two quarter-percentage-point reductions by the end of the year.