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Singapore Savings Bonds: Is It Better Than When It First Launched in 2015?

Singapore Savings Bonds

Joanne Poh

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Remember that time your friend became an overnight millionaire thanks to his investments, and threw that crazy party you barely came out of alive? He probably did not make that money by investing in Singapore Savings Bonds.

Every since the launch of Singapore Savings Bonds on the scene, they’ve been regarded as a conservative investment with low returns, just something to hedge against the riskier investments in your portfolio.

You might have turned your nose up at this investment vehicle before, but Singapore Savings Bonds have actually become much more attractive since their inception in 2015.

Here’s why.

 

Interest rates have increased significantly

2015

Let’s say you bought Singapore Savings Bonds in October 2015. If you had held those bonds to maturity (ie. 10 years until October 2025), you would have earned a 2.63% per annum return on your investment. That means buying $10,000 worth of bonds would have earned you $2,691 worth of interest.

Those aren’t such bad interest rates. But the earlier you redeem your bonds, the more sharply you’ll find your returns get reduced. (There is no penalty for early redemption so you can do so anytime you want.)

Let’s look at interest rates for redemption of that $10,000 worth of Oct 2015 bonds after 1-3 years.

  • 1 year: 0.96% interest or $96
  • 2 years: 1.02% interest or $205
  • 3 years: 1.32% interest or $398

At such interest rates, you’d be better off putting your money into a fixed deposit or even a high interest rate savings account.

2018

Fast-forward to March 2018. If you buy Singapore Savings Bonds next month and hold on to them for 10 years, your return per year will be 2.11%, earning you $2,140 in interest on a $10,000 investment. That’s even worse than in 2015, you cry!

But guess what, the interest rates you get when you redeem your bonds after 1-3 years have actually gotten better, as follows.

  • 1 year: 1.42% interest or $142
  • 2 years: 1.48% interest or $297
  • 3 years: 1.57% interest or $470

Compare that with the early redemption interest rates on the October 2015 bonds and you’ll see a world of difference.

 

How do Singapore Savings Bonds interest rates compare to fixed deposit interest rates?

Let’s compare the Singapore Savings Bonds interest rates with the best fixed deposit promotional interest rates at the moment.

Bank

12 months

24 months

Maybank

1.4%

1.55%

CIMB

1.25% (promotional rate only applicable to $20,000 and above)

1%

RHB

0.45%

0.85%

As you can see, fixed deposit interest rates are comparable to those offered to Singapore Savings Bonds purchasers in March 2018 who choose to hold on to the investment for 1-2 years.

The difference is that, to put your money into a fixed deposit, you’ll be required to put up a larger sum. You can invest in Singapore Savings Bonds for just $500, while banks generally will require you to put at least $1,000 in a fixed deposit, and often much more if you want to take advantage of promotional rates.

Fixed deposits are also less flexible. If you are unable to wait till your deposit reaches maturity for whatever reason, you may receive less or lower interest.

Given the fact that both are very low risk investments, it looks like Singapore Savings Bonds are definitely a more attractive investment right now than fixed deposits for those who wish to invest the money for just 1-2 years.

Have you ever invested in Singapore Savings Bonds? Share your tips and experiences in the comments!

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Joanne Poh

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.