Demand slips on latest Singapore Savings Bond with 10-year average return at 3.3%

THE latest Singapore Savings Bond (SSBs) allotted on Wednesday (Jun 26) saw a fall in the number of applications, as yields slipped from the earlier tranche.

The July tranche of the Singapore government-backed bonds received a total of S$1.3 billion in applications, for the S$1.1 billion that was offered. Some S$1.2 billion were applied within allotment limits.

In comparison, the June issuance received S$1.6 billion in applications for the S$1 billion on offer.

The latest tranche offered a first-year interest rate of 3.26 per cent and a 10-year average return of 3.3 per cent.

This is down from the June issuance, which offered a first-year interest rate of 3.26 per cent, and a 10-year average return of 3.33 per cent. The June tranche offered the highest 10-year average return since December 2023.

The SSBs were offered using the quantity ceiling format.

Applicants who applied for S$59,000 or lower were fully allotted, subject to individual allotment limits.

Around 10.5 per cent of the applicants who applied for S$59,500 or higher were allotted S$59,500 at random; the remaining applicants were allotted S$59,000.

Applications for the SSBs closed on Jun 25, and the bonds will be issued on Jul 1.

In the first half of 2024, demand for the SSBs fell as yields slipped below 3 per cent, in line with rate-cut expectations.

But yields have risen again, amid the possibility that the US Federal Reserve would leave interest rates higher for longer.

Earlier in May, Fed chair Jerome Powell said that further rate hikes remained “unlikely”, and suggested that the benchmark policy rate would be held until inflation was under control.

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

They are, however, subject to adjustments to ensure that interest rates do not dip over time and form inverted yield curves, in which the yields of short-dated bills exceed those of longer-dated bonds.