SINGAPORE SAVINGS BONDS OR FIXED DEPOSITS?

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Dear readers, recently I shared with readers the Oct 2018 Singapore Savings Bonds (you can read the post here as well as a new Fixed Deposits from Hong Leong Finance that pays 1.8% yields for a holding period of 12 months (you can read more here). Some people may ask which is a better deal: Singapore Savings Bonds or those Fixed Deposits. Before we jump into the verdict, let us review the background behind the Singapore Savings Bonds and the Fixed Deposits again.
Let me start off with Fixed Deposits. So far, with the exception of OCBC Great 220, which pays an annual yield of 2.20% for a holding period of three years, the highest yields so far which I have seen is 1.85% per annum. And to be more exact, not all those fixed deposits touting 1.85% per annum actually pays out this 1.85% fixed deposits since some of these fixed deposits have a holding period of less than 12 months and hence the 1.80% or so yields are pro-rated accordingly.

Now for the Singapore Savings Bonds. I am not sure whether investors who choose to focus on short-term yields would look at just the first year annual yield of the bond: averaging around 1.72% per annum and if so, investors may be disappointed when comparing the Singapore Savings Bonds with those higher yield fixed deposits. But, the reality is that if the Singapore Savings Bonds are held to the maturity of 10 years, an annualized yield of between 2.42% (for Oct 18 tranche) to 2.63% (for Jul 18 tranche) could be achieved. This compares with the shorter term fixed deposits where upon maturity, the investor may have to spend some effort to find another higher-interest vehicle to grow his monies again and it may not be the same plethora of higher-interest environment that we are looking at again (i.e. the investor may not be able to find one fixed deposit offering 1.80% or higher annualized yield).

Thus, I find the Singapore Savings Bond which offers a yield of more than 2.4% risk-free for ten years of holding is one of the excellent platforms to grow one’s monies without too much worries. And with the ten-year annualized yield of the Singapore Savings Bonds on the decline, investors may just want to subscribe to the bonds while they are available! Join the emailing list to receive regular Financial and Singapore stocks newsletters too! Like" me on Singapore Stocks Investing Facebook page to receive all posts on your Facebook as well as read more articles. Follow me on Twitter too.

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