Dear readers, Singapore Savings Bonds (SSBs) have gradually fallen out of favour among investors and savers in recent months. This decline in popularity is hardly surprising. As global and domestic macroeconomic conditions evolve, interest rates have moderated from their recent highs, and SSB returns have adjusted accordingly. For many savers who became accustomed to higher yields during the peak of the interest rate cycle, today’s SSB offerings may appear uninspiring.
The latest tranche on offer, SBFeb26, currently provides an average return of about 2.25% per annum over 10 years. For the first year, the interest rate stands at 1.35%, a figure that is no longer attractive in today’s environment, especially when weighed against the noticeably higher cost of living compared to just a few years ago. Inflation, even if moderated from its peak, continues to erode purchasing power, and savers are understandably more sensitive to low nominal returns.
Yet, beneath the surface of these headline numbers lies an important lesson about long-term planning, patience, and the strategic value of risk-free instruments: lessons that are often overlooked when investors chase the highest yields available at any given moment.
Looking Back: The Value of Earlier SSB Tranches
I have been purchasing Singapore Savings Bonds consistently over the past several years and have continued to hold them to this day. At the time of purchase, some of these SSB tranches were not the most attractive instruments available in the market. In fact, many investors questioned the rationale of locking money into SSBs when Treasury Bills (T-bills) were offering higher yields.
However, after recently reviewing my portfolio and computing the interest returns from my previously purchased SSBs, I realised something noteworthy: for the year 2026, the annual yield from my existing SSB holdings amounts to approximately 2.77%.
In today’s context, this is a respectable return for a risk-free instrument backed by the Singapore Government. More importantly, it is more than double what the latest SSB tranche offers for its first year, and it is also highly competitive relative to current short-term risk-free instruments.
This experience reinforces an important investing principle: the attractiveness of an investment should not be judged solely by its initial headline rate. Instead, investors should consider how returns evolve over time, especially for instruments designed with step-up interest structures like SSBs.
Understanding the Structure of Singapore Savings Bonds
Singapore Savings Bonds are unique in several ways. They are:
- Fully backed by the Singapore Government
- Capital guaranteed
- Flexible, allowing investors to redeem their bonds monthly with no penalty
- Designed with a step-up interest rate structure, meaning returns increase the longer the bond is held
Unlike fixed deposits or T-bills, SSBs reward patience. Early-year returns are often modest, but later-year yields can be significantly higher, especially if the bond was issued during a period of elevated interest rates.
This structural feature is precisely why older SSB tranches are now outperforming newer ones on an annual basis. Investors who locked in these bonds years ago are enjoying yields today that are no longer available to new subscribers.
The T-Bills Temptation: Short-Term Gains vs Long-Term Strategy
During the period when interest rates were rising rapidly, T-bills became extremely popular among Singapore investors. With yields exceeding those of SSBs, it was easy to see why many flocked to them.
However, T-bills come with inherent limitations:
- They are short-term instruments, typically maturing in 3 months, 6 months, or 1 year
- Upon maturity, investors face reinvestment risk, especially if interest rates decline
- Returns are not locked in beyond the maturity period
My personal saving and investing strategy has always been guided by a longer-term perspective. While I did allocate some funds to short-term instruments when yields were compelling, I remained committed to building a core allocation to Singapore Savings Bonds.
The reasoning was simple: interest rate cycles do not move in one direction forever. When rates eventually decline, investors holding long-duration, higher-yielding risk-free instruments would be in a much stronger position.
As we can see today, this strategy is now bearing fruit. The risk-free interest income I am receiving from my older SSBs far exceeds what is available from current SSB tranches or newly issued T-bills, at least in their initial years.
The Power of Locking in Yields
One of the most underestimated advantages of Singapore Savings Bonds is the ability to lock in yields during favourable interest rate environments, while retaining liquidity.
Unlike traditional bonds, SSBs allow investors to redeem their holdings at par value every month. This means:
- There is no price volatility risk
- Investors are not penalised for early redemption
- Capital remains accessible when needed
In effect, SSBs combine the best features of long-term bonds and liquid savings instruments. This makes them particularly suitable for investors who value capital preservation but still want reasonable returns.
The 2.77% annual yield I am projected to receive in 2026 did not come from chasing the highest yields at the time—it came from committing to a disciplined, long-term allocation strategy.
Comparing SSBs with Dividend-Paying Equities
There is, of course, another camp of investors who argue that 2.77% is not particularly attractive, especially when compared to the 4% to 6% dividend yields offered by selected defensive Singapore equities such as:
- Banking stocks
- Real Estate Investment Trusts (REITs)
This argument is valid: up to a point. Dividend-paying stocks can indeed provide higher income, and many Singapore investors have benefited handsomely from these instruments, particularly in recent years.
However, it is essential to recognise that equities are not risk-free.
Dividend yields are not guaranteed. Banking profits can be affected by economic downturns, regulatory changes, or credit losses. REITs are exposed to interest rate risk, property market cycles, refinancing challenges, and tenant defaults.
Higher returns almost always come with higher risk, even if those risks appear muted during bull markets.
Market Optimism and Valuation Risks
In recent times, many Singapore investors seem emboldened by:
- The strong performance of the local stock market
- The resilience of Singapore banks
- Continued optimism expressed by analysts and market commentators
While optimism has its place, history teaches us that markets do not move in straight lines. Periods of sustained gains are often followed by corrections, sometimes sharp and unexpected.
Singapore equities, particularly blue-chip names, are not immune to valuation risks. Elevated prices can compress future returns, even if underlying businesses remain fundamentally sound.
In such an environment, it is prudent not to allocate all capital to risk assets, no matter how attractive they may seem at the moment.
The Strategic Importance of Liquidity
This brings me to what I believe is one of the most overlooked aspects of personal finance: liquidity.
Liquidity is often criticised for being “unproductive” or “low-yielding.” Yet, liquidity serves a crucial purpose—it provides financial resilience.
Holding adequate liquidity allows investors to:
- Meet unforeseen expenses without selling assets at a loss
- Take advantage of opportunities during market downturns
- Sleep better at night, knowing capital is preserved
My advice to investors is not to abandon risk assets entirely, but to maintain a healthy balance. Liquidity should not sit idle if it can be deployed into risk-free instruments such as SSBs, even if returns appear modest.
A 2% to 3% risk-free return may not excite headlines, but it can make a meaningful difference over time, especially when compounded and preserved during market volatility.
When Markets Turn South
Market downturns often arrive without warning. They can be triggered by geopolitical events, financial crises, policy missteps, or simply shifts in investor sentiment.
When markets take a sudden dive, liquidity becomes invaluable. Investors with cash or near-cash instruments are not forced sellers; instead, they become buyers of opportunity.
SSBs, in this context, function as an excellent liquidity anchor. They allow investors to earn a reasonable return while waiting patiently for better entry points into risk assets.
Final Thoughts: A Case for Patience and Prudence
Singapore Savings Bonds may no longer be the most talked-about investment instrument today, but their value should not be underestimated.
My projected 2.77% annual return in 2026 from previously purchased SSBs is a testament to the benefits of:
- Long-term thinking
- Consistent investing
- Understanding interest rate cycles
- Prioritising capital preservation
In a world increasingly driven by short-term performance and yield-chasing behaviour, SSBs offer a quiet but powerful reminder that steady, risk-free returns still have an important role to play in a well-balanced portfolio.
As always, investors should assess their own financial goals, risk tolerance, and time horizon. But regardless of market conditions, liquidity and prudence remain timeless virtues in investing.
Sometimes, the best strategy is not to chase what is fashionable—but to stay disciplined, patient, and prepared.