Singapore Savings Bonds: Why Demand Fell, What the Numbers Mean, and How to Invest Smarter in 2025

Singapore Savings Bond demand missed the mark by over S$200 million, with interest rates sliding to their lowest in months. Is this a warning sign, or a quiet opportunity for savvy investors to lock

What Just Happened with the Latest SSB?

The May 2025 Singapore Savings Bond (SSB) issue saw only S$431.5 million in applications-falling short by S$268.5 million of the S$700 million on offer. For context, April’s issue nearly sold out, with S$677.9 million applied for. This sudden drop in demand has investors asking: what changed?

Here’s the quick summary:

• May 2025 SSB 10-year average return: 2.69%

• First-year interest rate: 2.49%

• April 2025 SSB 10-year average return: 2.85%

• First-year interest rate: 2.73%

• Total applied (May): S$431.5 million

• Total available: S$700 million

Both demand and returns are down. But why? And what does it mean for your portfolio?

Why Did SSB Demand Drop?

Interest Rates Slipped

The main reason is simple: lower returns. The May 2025 SSB offers a 10-year average return of 2.69%, down from 2.85% in April. The first-year rate also dipped to 2.49% from 2.73%. When rates drop, investors get less excited-especially if they locked in higher rates just a month earlier.

Yield Curve Steepening

There’s another twist. Singapore’s government bond yield curve just turned the steepest it’s been since 2022. As of late April, the 10-year government bond yield hit 4.48%, while the 2-year yield was 3.96%-a 0.52% (52 basis points) spread. This steep curve usually signals optimism about the economy and rewards investors for holding longer-term bonds.

But here’s the catch: SSB rates lag behind government bond yields by about a month. So, the SSB rates you see today reflect bond yields from last month, not the current spike. This means SSB rates could rise if the yield curve stays steep, but for now, they’re playing catch-up.

How SSB Interest Rates Are Set (And Why They Change)

SSB interest rates are pegged to the average yields of Singapore Government Securities (SGS) from the previous month. If SGS yields rise, SSB rates go up next month-and vice versa. The government also tweaks rates to make sure your returns don’t “step down” over time, especially if the yield curve inverts (when short-term bonds yield more than long-term ones).

Example:
If you invested S$10,000 in the May 2025 SSB and held it for 10 years, you’d get an average of 2.69% per year, or about S$2,690 in total interest.

Current SSB Rates vs. Other Safe Options

Let’s see how SSBs stack up against other safe investments in Singapore right now.

Takeaway:

• SSBs are lagging behind T-bills for short-term yield, but they’re still competitive with fixed deposits.

• SSBs offer unique flexibility: you can redeem them monthly with no penalty, making them a handy “war chest” for emergencies or future investments.

SSB Interest Rate Trend (2024–2025)

*Projected for June 2025.

Why Are SSB Rates Falling?

Global Rate Cuts Are Coming

The US Federal Reserve has started its rate-cut cycle, and Singapore’s yields tend to follow global trends. As central banks lower rates to boost economies, bond yields (and therefore SSB rates) usually fall too. Projections suggest Singapore’s 10-year government bond yield could dip to 2.80% by late 2025, which would mean even lower SSB rates ahead.

Investor Demand Shifts

With lower SSB rates, some investors are moving to T-bills or higher-yielding fixed deposits for the short term. Others may be waiting for the next SSB issue, hoping for a bump in rates if the yield curve stays steep.

Singapore Government Bond Yield Curve (April 2025)

The curve is steep-meaning long-term bonds pay more than short-term ones. For SSB investors, this could mean higher rates are possible in future issues, but only if the steep curve persists.

Should You Buy the Latest SSB?

Pros:

• Safe and Flexible: SSBs are backed by the Singapore government and can be redeemed monthly, making them a low-risk, liquid option.

• Lock in Rates: Even if rates fall further, you’ll keep your locked-in rate for up to 10 years.

• No Penalty for Early Redemption: Unlike fixed deposits, you can get your money back without losing accrued interest.

Cons:

• Rates Are Falling: If you already locked in higher rates in previous SSBs, there’s little reason to buy this lower-rate tranche.

• Short-Term Alternatives Yield More: T-bills and some fixed deposits currently offer higher short-term yields, though with less flexibility.

What’s Next for SSB Rates?

Projections for the June 2025 SSB suggest a further dip, with a 10-year average return of about 2.58% and a first-year rate of 2.23%. Unless the government bond yield curve stays steep or moves higher, SSB rates may keep trending down.

SSB Application Demand (April vs May 2025)

Practical Takeaways: What Should You Do Now?

1. If You Need Flexibility:
   SSBs are still a solid choice for your emergency fund or short-term cash. You can redeem anytime, and your capital is safe.

2. If You Want Higher Yields (Short Term):
   Consider T-bills or fixed deposits, but remember you’ll lose flexibility-they’re locked in until maturity.

3. If You Already Have Older SSBs:
   Hold onto them! You’re earning higher rates than what’s available now.

4. If You’re Waiting for Better SSB Rates:
   Don’t hold your breath. Projections show rates may fall further, not rise, unless there’s a big change in global bond markets.

5. If You’re New to SSBs:
   Start small. Use SSBs as your “safe” bucket, then explore higher-yielding or riskier options as your confidence grows.

Iggy’s Iguana Wisdom: How I’d Play It

If I had spare cash that I might need in the next year or two, I’d still park it in SSBs for the flexibility. For longer-term cash, I’d consider locking in some T-bills while yields are above 3%. But I wouldn’t wait for SSB rates to bounce back-they’re more likely to slide as global rates fall. And if you already have SSBs from late 2024 or early 2025, give yourself a pat on the back-you locked in the best yields in years.

Key Action Items

• Check your existing SSB rates: Hold onto higher-yielding tranches.

• Compare SSB rates to T-bills and fixed deposits: Choose based on your need for flexibility vs. yield.

• Don’t wait for higher SSB rates: Projections show a downward trend.

• Use SSBs for your emergency fund: Safe, flexible, and government-backed.

Stay sharp, stay curious, and remember: in investing, sometimes the “boring” options are the ones that keep your portfolio strong when the market gets wild. Till next time, this is Iggy from The Investing Iguana-helping you make sense of your money, one bond at a time.

If you found this breakdown useful, hit subscribe for more bite-sized investing wisdom, and share your SSB questions in the comments!