SSB vs SGS: Which One Suits You More?

SSB vs SGS: When it comes to investing for the future, there are many options available to choose from. One option is to invest in bonds. There are two types of bonds available in Singapore – Singapore Savings Bonds (SSB) and Singapore Government Securities (SGS). So, which one should you choose?

Both SSB and SGS are different in terms of their features, benefits, and risks. SSB is a lower-risk investment option with a guaranteed interest rate, while SGS is a higher-risk investment with the potential for higher returns.

To decide which type of bond is right for you, it is important to understand the differences between them. Keep reading to learn more about the differences between SSB vs SGS, and which one is right for you!

1. What are Singapore Savings Bonds (SSB)?: SSB vs SGS

The Singapore Savings Bonds (SSB) is a long-term investment scheme offered by the Government of Singapore. It was introduced in 2015 to help individuals save for their future needs.

How does the SSB work?

The SSB operates similarly to a regular savings account; however, there are some notable distinctions. Firstly, the interest rates on the SSB are fixed for the entire duration of the bond. Consequently, you will have full transparency regarding the interest earnings right from the outset. Secondly, the SSB offers the flexibility of being held for up to 10 years. This extended holding period enables you to adopt a more long-term perspective on your investments, potentially leading to higher returns.

How do I invest in the SSB?

Investing in the Singapore Savings Bonds (SSB) is easy. You can do it through any of the major banks in Singapore. You will receive interest on your savings every six months, and you can redeem your SSB at any time during its term.

Read on to learn more about the differences between SSB vs SGS.

2. What are Singapore Government Securities (SGS) bonds?: SSB vs SGS

The Singapore Government Securities (SGS) bonds are issued by the Singapore Government as a way to raise funds to finance its expenditure. The bonds are denominated in Singapore dollars and are issued in tenures of 2, 5, 10, 15, 20 or 30 years. They are considered to be low-risk investments, as they are backed by the full faith and credit of the Singapore government. Continue reading to learn more about SSB vs SGS.

How does the SGS work?

The bonds are denominated in Singapore dollars and have a fixed coupon rate and maturity date, which is determined at the time of issuance. Investors who purchase SGS bonds will earn interest on their investment at the fixed coupon rate until the maturity date. On the maturity date, the government will repay the principal amount of the bond to the investors.

They are issued through regular public auctions and are tradable in the secondary market, which means that they can be bought and sold among investors after the initial issuance. SGS bonds are considered as a benchmark for the Singapore Bond market and also considered as safe haven for investors. Additionally, the SGS bonds are also used as a benchmark for other fixed-income securities in Singapore.

How do I invest in SGS?

There are several ways to invest in Singapore Government Securities (SGS), including:

  1. Primary market: You can participate in SGS auctions through a Central Depository (CDP) account, and purchase SGS directly from the government.
  2. Secondary market: You can also purchase SGS on the secondary market through a broker or from other investors who already own SGS, but the price may vary depending on supply and demand.

It’s important to note that investing in SGS carries a degree of risk, as with any investment. Before investing, it’s always a good idea to consult with a financial advisor to determine if it’s a suitable investment for your needs and to understand the associated risks and benefits.

3. Understanding the Key Differences Between SSB and SGS:

When comparing Singapore Savings Bonds (SSB) and Singapore Government Securities (SGS), several significant distinctions come to the forefront:

Singapore Savings Bonds (SSB) Singapore Government Securities (SGS)
1) Interest Rates 3.32% p.a. if held to year 10 (Nov 2023) Varies
2) Interest Payment Every 6 months Every 6 months
3) Tenure 10 Years
2, 5, 10, 15, 20 or 30 years
4) Withdrawalbility Redeem anytime, no penalty
No early redemption allowed
5) Tradability No
Tradable through SGX
6) Minimum Deposit $500 $1,000
7) Maximum Deposit $200,000 $3,000,000
8) SRS-approved Yes Yes
9) CPFIS approved No Yes

1) Interest Rates:

  • SSBs offer a fixed interest rate for the entire duration of the bond.
  • SGS features variable interest rates that adjust with market conditions.

2) Interest Payment:

  • Both SSBs and SGS offer interest payments every 6 months.

3) Tenure:

  • SSBs have a fixed 10-year maturity period, starting from the date of issue.
  • SGS provides flexibility with multiple bond tenures, including 2, 5, 10, 15, 20, or 30 years, determined from the date of issue.

4) Withdrawalbility:

  • SSBs grant the flexibility of early redemption without any penalties, allowing investors to access their funds at their convenience.
  • SGS does not allow early redemption, necessitating adherence to the chosen tenure. However, SGS bonds can be traded on the secondary market, providing some degree of liquidity.

5) Tradability:

  • SSBs are non-tradable.
  • SGS bonds can be traded on the secondary market, enhancing liquidity.

6) Minimum Deposit:

  • SSBs require a minimum investment of $500, making them accessible to a broader range of investors.
  • SGS necessitates a minimum investment of $1,000, slightly higher than SSBs.

7) Maximum Deposit:

  • The maximum investment amount for SSBs is $200,000.
  • The maximum investment amount for SGS is $3,000,000.

8) SRS-Approved:

9) CPFIS Approved:

  • SGS bonds can be funded by cash, SRS funds, and Central Provident Fund Investment Scheme (CPFIS) funds.
  • SSBs support cash and SRS funding but are not compatible with CPFIS funding.

These distinctions serve as crucial points for consideration when deciding between SSB and SGS, as they influence factors like accessibility, flexibility, and potential returns.

4. Choosing Between SSB and SGS

When it comes to choosing between Singapore Savings Bonds (SSBs) and Singapore Government Securities (SGS), understanding the key differences is essential. These government-issued investment options are backed by the Singapore government, offering security, but they present distinct features that influence your choice.

Maturity and Interest Rate Structures

Understanding Maturity and Interest Rates

One of the first considerations is the maturity period. SSBs offer an extended investment horizon, allowing your investments to mature over a 10-year period. In contrast, SGS bonds come with fixed maturity dates, ranging from 2 to 30 years. Furthermore, SSBs implement a stepped-up interest rate structure, with interest increasing gradually over time. SGS bonds, on the other hand, feature a fixed coupon rate set at the time of issuance.

Accessibility for Investors

Evaluating Accessibility

Another critical difference lies in accessibility. SSBs are exclusively available to retail investors, while SGS bonds cater to both retail and institutional investors, expanding the range of potential investors.

Consider Your Investment Goals and Time Horizon

Aligning with Investment Goals

To make the best choice, align your investment objectives with your time horizon. Typically, SSBs suit investors with longer-term horizons and a lower risk tolerance, while SGS bonds may be preferred by those with varying investment horizons and a higher risk appetite.

Interest Rates and Redemption Terms

Exploring Interest Rates and Redemption

Notably, interest rates differ. SSBs offer a stepped-up interest rate structure, meaning a gradual increase over time. In contrast, SGS bonds feature a fixed coupon rate. When it comes to redemption, SSBs offer flexibility, allowing redemption at any point during the year, enhancing liquidity. SGS bonds adhere to a stricter schedule, permitting redemption only at maturity.

Tailoring Your Investment Choice to Your Goals

Customizing Your Investment

In the world of investing, there is no universal, one-size-fits-all solution. Your investment choice depends on your specific goals and risk tolerance. For example, if you prioritize low-risk investments, Singapore Savings Bonds (SSBs) may be an excellent choice. However, if you are open to embracing higher risk in pursuit of potentially higher returns, Singapore Government Securities (SGS) could be a more appealing option. Ultimately, your investment choices should align with your unique goals and risk tolerance.

5. Conclusion and Next Steps

In summary, SSBs offer flexibility, while SGS provides stability and the potential for higher returns. It’s important to align your choice with your unique goals and risk tolerance.

For personalized guidance on your investment, consult our licensed financial advisors. Get the information you need to make the right decision!

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