Should You Lock In The Best Fixed Deposit Rates or SSBs Now?

As inflation slows down in the second half of this year to pave the way for interest rate cuts in 2024, investors might be looking to lock in their rates on guaranteed return products to secure higher returns. 

Given that the markets continue to fluctuate, which product should one consider for better cash savings?

What is a fixed deposit?

A fixed deposit (also known as a time deposit) is a type of account that allows you to earn a fixed amount of interest when you deposit a sum of money over a certain amount of time. 

Your money is usually locked up for the specified duration and most banks require a minimum deposit of at least S$20,000 for their promotional rates.

Latest bank fixed deposit rates in Singapore 

Across the local banks, DBS is offering one of the highest rates at 3.2% for a 12-month fixed deposit on a minimum deposit amount of S$1,000. At foreign bank Maybank, you can earn 3.75% in a year but you need S$20,000 lying around.

Latest bank fixed deposit promotions in Singapore

BankMinimum Deposit (SGD)Tenure (months)Promotional Interest Rates
RHB$20,0006Premier Customers: 3.45%
Personal Customers: 3.40%
Standard Chartered Bank$25,00063.20%
Source: Seedly, data for September 2023

What are Singapore Savings Bonds?

Singapore Savings Bonds (SSB) are a type of bond that pays out interest every six months. They are backed by the Singapore government and have a 10-year maturity; the longer you stay invested, the higher your interest rate earned. 

In the October 2023 issue, for instance, the SSB interest rate increases from 3.05% in the first year to 3.48% in the 10th year.

Year from issue date12345678910
Average return per year3.05%3.05%3.05%3.05%3.05%3.05%3.06%3.09%3.13%3.16%
**At the end of each year, on a compounded basis. Source: October 2023 SSB issue.

Unlike fixed deposits where a penalty is charged for early withdrawal, you can withdraw your money anytime without penalties.

Latest Singapore Savings Bonds interest rates

The rates for Singapore Savings Bonds vary each month. Here are the 10-year average returns for past month issues:

  • August 2023: 2.99%
  • September 2023: 3.06%
  • October 2023: 3.16%

What are cash management accounts? 

Cash management accounts are low-risk investment products that let you earn decent yields on your spare cash while offering very high liquidity.

When you make a withdrawal, you typically receive your proceeds in 2 – 3 business days. What if you need your cash back urgently? Syfe Cash+ Flexi is the only provider that offers next-day withdrawals.

This is unlike fixed deposits where your lock-in is subject to the product tenor, and Singapore Savings Bonds where you receive your withdrawal by the 2nd business day of the following month.

Besides low risk and high liquidity, Cash+ Flexi offers returns that are in line with or above the prevailing market rates. 

In addition to the current Cash+ Flexi, Syfe has recently launched Cash+ Guaranteed, which enables investors to earn fixed return rates with a brief lock-in. It provides superior guaranteed returns of 3.7% p.a. on your idle cash for a 3, 6 or 12-month lock-in period. We partner with MAS-regulated banks to deliver the best optimised fixed return rates for your cash savings to maximise returns while maintaining liquidity. 

This also means you don’t have to keep switching banks to unlock high return rates because Syfe does the work for you at securing and updating to competitive market rates.

The best cash management products in Singapore

Headlines often tout “the best cash management accounts in Singapore” without really explaining what makes a solution “the best”. 

At Syfe, we believe that cash management accounts should offer stability (i.e. no negative returns or drawdowns) alongside attractive yield. After all, you’re parking your cash for short-term needs like your emergency fund or a big upcoming purchase. You wouldn’t want your portfolio value to decline just when you need your funds.

That’s why it’s important to look beyond the advertised yield to consider factors like risk and withdrawal times. A product may have a high projected yield, but it will also come with a higher drawdown (i.e. peak to trough fall in return). There may be negative months when bond markets drop. Can you stomach that volatility in your cash savings?

The risk of locking in current rates 

As shown above, fixed deposits and Singapore Savings Bonds currently offer attractive rates. But in a rising interest rate environment, is it worth locking yourself in at those rates?

Just two months ago, these were the promotional rates being offered by banks in Singapore. If you had placed your funds back then, a significant part of your spare cash would have been locked in at a similar or lower rate at most banks. 

Source:  The Wacky Duo

For illustration, these are the promotional rates for September, as compiled by Seedly.

Source: Seedly

Despite cooling inflation, the interest rates are expected to remain elevated till the second quarter of 2024, after which they might drop one percentage point by the year-end. 

At least in 2023, banks are likely to keep their fixed deposit rates high. But even if term deposits offer lucrative rates, not many of us have multiple lump sums of $20,000 lying around to be able to access higher promotional rates

The interest rates of Singapore Savings Bonds are also locked into a fixed schedule. If the November 2023 issue offers higher rates, you will need to spend time and effort buying those new bonds. There’s also the risk you might not even get your full allotment due to oversubscription, as investors of the April 2023 tranche faced.

On the flip side, with Cash+ Guaranteed, you can rest assured that you will get the best rates without having to move your money around, with the flexible lock-in period of 3, 6 or 12 months. But if you prefer the flexibility of liquidity, you can opt for Flexi, which doesn’t have a lock-in period. There is no minimum deposit requirement either, for both of the products. 

As interest rates continue to hover on the high side, the projected returns for Cash+ Flexi and Cash+ Guaranteed will get updated as rates move. You’ll be able to capitalise on those potentially higher returns without the capital commitment of opening a new fixed deposit account or the hassle of buying new SSB issues!

What should you do for your cash?

If you don’t have immediate money needs, and you are comfortable with the rate and locking in your cash for a brief period, Cash+ Guaranteed is a good option for a short 3-month duration at 3.7% p.a. return. But if you do require money later or you prefer to stay flexible and have access to cash just in case, Cash+ Flexi can give you the liquidity that you need while giving you stability, on par with market returns

Creating a Cash+ account is simple and fuss-free. All it takes is 3 minutes to sign up for Syfe Cash+ using Singpass.

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