How are SSB rates derived and comparison of upcoming and latest SSB issue

Starting from this post, I will be posting comparison of whether to buy into the latest or the upcoming issue on a regular basis. The advice that is given on forum is that one should wait till the last minute to decide on which issue to take up. Therefore, it came to my mind that I should post this kind of post every month for my readers to decide for themselves.

In my maiden post about Singapore Savings Bond, I talk about the advantages of Singapore Savings Bond compared to fixed deposits and about how SSB rates are calculated.

In this post, I will recap on how SSB rates are calculated and whether should you get the upcoming or latest issue.

How are SSB rates calculated?

For the purpose of calculating the Step-up Coupon rates for Savings Bonds, the 1, 2, 5 and 10-year benchmark SGS yields are used as reference. These reference yields will be based on the simple average of the respective daily SGS benchmark yields from the month before the public notice of issuance (the “reference SGS yields”), as provided on the “Daily SGS Prices” page of the SGS website . Reference SGS yields for tenors between the benchmark issuances are interpolated using a hermite spline function.

This quote tells us how MAS derives the SSB coupon rates. It states that MAS will use 1 year, 2 year and 5 year SGS yield of the month before the public notice of issuance (If the bond is to be issued in January, it will take December yield). You can visit this website to estimate the rates by yourself to decide whether to wait for the next tranche or to buy into this tranche.

The investor’s average annual compounded return over a holding period (e.g. 5 years) should correspond to yield to maturity of a corresponding SGS (e.g. 5 year SGS).

What this quote from SSB website mean is that if the SGS yield is already stepped up (i.e 2 year rate should be higher than 1 year rate so on and so forth) then one can refer to the SGS to determine the SSB rates for the upcoming issue.

However, there is exception to this scenario which I will share it with everyone.

The second exception may arise from time to time if the shape of the SGS yield curve does not allow the interest rates to step-up. In such instances, the design of the Savings Bond prioritises the “step-up” feature of the interest rates over the matching to SGS yields for a given year (explanations below). This is because the objective of the Savings Bond programme is to encourage and facilitate long-term savings and investment. An adjustment is made so that the interest payments do not step down in any year. This adjustment does not affect the return on the Savings Bond if it is held for the full 10 years.

If the SGS yield does not allow the yield to step up as the year goes by, MAS will force the yield to step up using their complex mathematical formula. This is very important as this will be the first time that SGS yield for second year that is lower than the 1 year yield on average. It means that you will receive higher yield if you hold just for 1 year instead of holding for 2 years.

There are two reasons why sometimes MAS have to make adjustments to the SSB yield to ensure that it is still step up. They are:

1. Some or all of the longer-dated reference yields are lower than shorter-dated reference yields (an “inverted yield curve”); and/or

2. A particular reference yield is much higher than the one immediately before it, but not much lower than the one immediately after (e.g. the five-year yield is much higher than the two-year yield, but not far below the ten-year yield). This is known as a “highly convex yield curve”.

The second scenario is what the current SGS yield is what we are currently facing where the second year yield is lower than the first year yield. The question is now how can MAS do adjustment to ensure that the SSB yield for the first year be lower than second year yield?

 MAS shall lower the coupon rates by the minimum amount necessary (subject to the mathematical programming function below), to maintain a weakly monotonically increasing step-up coupon schedule…. This adjustment is akin to reducing the size of the coupons in earlier years, and increasing the size of the coupons in later years, while adjusting for the time value of money based on the risk-free discount rates.

Adjusted coupon formula

Source: Singapore Savings Bond

This is the complex mathematical formula that is openly shared by MAS. The effect to this adjustment using this formula is that the average SSB yield will be less than the average SGS yield (that is used to determine the SSB yield).

Comparing upcoming and latest issue


Source: Singapore Savings Bond

This is the latest SSB which you can buy by 9pm on 26 December 2018 and the screenshot below is the estimated SSB yield for the upcoming issue.

SSB Estimated Rates

Do take note that the estimated SSB yield in the screenshot will be lowered (NOT SHOWN IN SCREENSHOT) to take into the account of the adjustments that will be made by MAS.


This will be the first time MAS will be doing adjustments for SSB rates so we are not sure how much difference the SSB yields will differ from SGS yields after the adjustments. However, even without adjusting, it is worth to note that the latest SSB issue due 26 December 2018 has the best rates for 1Y, 2Y, 5Y and 10Y. Therefore, the latest SSB issue might be the juiciest SSB issue in 2018 and going forward in 2019.

8 thoughts on “How are SSB rates derived and comparison of upcoming and latest SSB issue

  1. Hi Wei Ming,

    “However, even without adjusting, it is worth to note that the latest SSB issue due 26 December 2018 has the best rates for 1Y, 2Y, 5Y and 10Y.”

    The Jan 2019 issue (due 26 Dec 2018) does not have the best rate for 5Y and 10Y. The previous issue, Dec 2018 has a higher rate for 5Y at 2.32% and 10Y at 2.57%. Even so, the highest 10Y interest rate for SSB is at 2.78%.


    1. Hi there. I think I phrase it as if it has the best rates since the inception of SSB haha. You are correct. However, if you compare between the latest and upcoming estimated rates then you will be able to understand that the latest SSB issue has better rates than the upcoming one.


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