January 2019 – Should you buy the upcoming or latest SSB issue?

I understand that we Singaporeans always want to have the best deals. Starting from the previous post about Singapore Savings Bond, I will be posting comparison of whether to buy into the latest or the upcoming issue.

Before we do any comparison, let’s do a recap how MAS derives the rates for SSB using the full month SGS rate.

SSB rates are derived by doing an average on the respective daily SGS benchmark yields from the month before the public notice of issuance. The bottom of the screenshot shows the average rate for the month of December.

Looking at both screenshots, you can easily tell the rates for 5th and 10th year. Remember how MAS will use a very complex mathematical formula to derive the rates when the SGS rates does not allow step up? It doesn’t seem difficult to derive after all! In order for the SSB rates to step up, MAS used the lowest rate at 2nd year as the starting rate for the first three years. We shall see how MAS calculates in the coming months to see whether this trend holds true.

The screenshot above shows the estimated SSB rates for the upcoming issue.

1Y (Upcoming vs Latest) – 1.97% vs 1.98%

2Y (Upcoming vs Latest) – 1.93% vs 1.98%

5Y (Upcoming vs Latest) – 2% vs 2.04%

10Y (Upcoming vs Latest) – 2.18% vs 2.20%

Looking at just 5Y and 10Y, you could see that the rates for latest issue is higher than the estimated rates for upcoming issue. As for 1Y and 2Y, MAS may use the lowest rate of 1.93% to be the rate for 1Y meaning to say that if you are looking to buy SSB for short term then you are better off getting the current issue (due in few days time).

There are still 4 more working days for the computing of latest SSB rates but I do not see any significant change to the rates. Therefore, I am recommending people who are looking to buy SSB to get the current issue.

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