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Beyond Singapore Savings Bonds and fixed deposits, what other low-risk investments are there?

Beyond fixed deposits and Singapore Savings Bonds, experts say investors can also consider Treasury bills and short-term government securities bonds as low-risk investment options.

SINGAPORE: Rising interest rates on fixed deposits have attracted those in search of safe returns, with some customers enduring hours-long waits to secure promotional rates put out by several banks.

While squirrelling away money in fixed deposits appears to be an attractive option, there are other low-risk alternatives that investors can consider.

These include the Singapore Savings Bonds, which have seen hot demand in recent months. Short-term Singapore Government Securities (SGS) bonds have also been tossed up by some experts as an alternative to holding cash.

Before deciding where to park your money, consider and compare investments that offer similar risks, said Providend’s senior client adviser Tan Chin Yu.

“The higher rates (for fixed deposits) are definitely attractive, but they should be compared with other similar instruments such as Singapore Savings Bonds, Treasury bills or even short-term SGS bonds,” he said.


Like the Singapore Savings Bonds, Treasury bills (or T-bills) and SGS bonds are debt securities issued and backed by the Singapore Government.

These domestic debt securities are issued for various purposes. For example, the Singapore Savings Bonds provide retail investors with a flexible and risk-free investment option.

T-bills, which have maturities of one year or less, and SGS bonds, with longer durations ranging from two to 50 years, are issued to develop the debt market.

All three have seen rising yields, like all other major economies’ bond yields, as global central banks go on a rate-hike race to curb inflation. Among them, T-bills offer the highest rate of return for now.

The latest six-month T-bill gave a yield of 3.32 per cent – the highest this year and up from 0.48 per cent in January. Likewise, T-bills with a one-year maturity have seen rising returns from 0.75 per cent to 3.1 per cent.

Meanwhile, the most recent issuance of two-year SGS bonds offered a coupon rate of 2.7 per cent, while the five-year equivalent issued earlier this month had a return of 2.92 per cent.

The Singapore Savings Bonds, whose rates have been dipping since hitting a record high of 3 per cent in its August tranche, have a 10-year average return of 2.75 per cent for October.


With their comparatively higher yields, T-bills and short-term SGS bonds are worth considering for investors looking to generate returns amid volatile market conditions, financial advisers told CNA.

Fully backed by the Government, they are also generally considered safe investments.

It is also likely that investors will get the amounts they apply for, unlike the Singapore Savings Bonds which have seen smaller allotment sizes amid red-hot demand, said PhillipCapital’s associate financial services manager Elijah Lee.

The Singapore Savings Bonds have a limit of S$200,000 per investor across different tranches, but for the August issue, the quantity ceiling – applied when applications exceed the issuance size – was S$9,000. 

Investors can put in up to S$1 million for each T-bill application and S$2 million for each SGS bond application. Retail investors typically get the amount they apply for, said Mr Lee.

In addition, there are no penalties for liquidating a T-bill or SGS bond before maturity, said Mr Tan, although he cautioned that doing so via a sale in the secondary market might carry the risk of capital losses.

T-bills and SGS bonds are tradable debt securities, meaning they can be bought or sold on the secondary market before maturity, although their prices are highly sensitive to interest rate movements. In general, bond prices and interest rates move in opposite directions so if interest rates rise, bond prices will fall and vice versa.

Apart from market risk, liquidity could be an issue if there are few interested buyers.

“The bond market is not like the stock market … so it can be very hard to find a taker,” said Mr Lee. “You may have to offer a drastic, fire-sale kind of price … but it is unlikely that you are willing to lose that much so you will probably just hold on to it.”

He added: “Six months (for a T-bill) may seem like a short time, but it can feel like an eternity if you’re caught in a sticky situation.”

And upon maturity, Mr Lee, who specialises in retirement strategies, said investors will have to start shopping around for investment options and face the possibility of interest rate risk.

Using the example of a six-month T-bill, he said: “The rates have been very attractive but after six months, what’s next? 

“You will have to contend with the fact that every time you renew, you are hoping that the rates are still good.”



For those deciding whether to invest in T-bills or short-term SGS bonds, experts recommend looking beyond the yield or return rate.

“An investor should always consider their time horizon which in general (means) the shorter the time horizon, the lesser risk one should take,” said Mr Tan. For instance in this case, one could opt for T-bills or short-tenor fixed deposits, instead of SGS bonds with maturity dates of two years and longer.

“Additionally, one should also consider the liquidity of the instruments, meaning how quickly they can access their capital if needed and if there are any risks in doing so,” he added.

“The best is to plan out properly the timeline when the money is required, then buy accordingly to your time frame.”

Things to note if you’re investing in T-bills and SGS bonds

A minimum of S$1,000 is required to invest in both SGS bonds and T-bills, with investment amounts in multiples of S$1,000.

The difference lies in how the returns are paid out – while the SGS bonds pay a fixed rate of interest twice a year, T-bills are issued at a discount and investors receive the full face value at maturity.

Both securities are issued via auctions where competitive and non-competitive bids are placed. As the name suggests, a competitive bid allows applicants to specify the yield they are willing to accept, while a non-competitive bid is one where investors only specify the amount they want to invest but not the yield.

For retail investors, especially those exploring T-bills and SGS bonds for the first time, a non-competitive bid will be their best bet, according to experts.

“Retail investors will have little influence on the price and have to accept the market price. Big institutions that are the majority of buyers will be the price setters,” said Mr Tan from Providend.

When it comes to deciding whether to tap on cash or funds in one’s Supplementary Retirement Scheme (SRS) or Central Provident Fund (CPF), Mr Lee recommends the first two given how they are “low-hanging fruits”.

“I will say use spare cash that you have and SRS funds first because they are yielding close to nothing.”

Mr Tan has a different opinion on SRS funds as they can only be withdrawn without penalty when one hits the statutory retirement age. Given the longer time horizon before these funds can be used, they can be better deployed into instruments such as equities, to better hedge against inflation.

Meanwhile, with funds in one's CPF Ordinary Account currently earning an interest rate of 2.5 per cent, experts said that T-bills may be a possible alternative to earn even higher returns, although investors will have to pop by a bank branch to make an application.

Online applications for T-bills are currently only available for cash and SRS funds, said Mr Lee.


Asked for his preference, Mr Lee said investors in search of risk-free investments should consider the Singapore Savings Bonds as their first choice, given the instrument’s “very good balance” of liquidity and decent returns.

Investors are free to withdraw or redeem the savings bond at any time even though the product is issued with a 10-year maturity term. There are no penalties involved and accrued interest will not be forfeited.

The interest rate for the next tranche of Singapore Savings Bonds could also be headed higher, given how average SGS yields have inched back up this month after the decline in August, Mr Lee said. The interest rates of each Singapore Savings Bond issuance are based on the average SGS yields in the month before applications open.

However, T-bills can still be a good option for those with funds that they would like to set aside for near-term expenses, such as downpayment for a house, and do not want to take big risks, experts said.

But ultimately, with returns from lower-risk options unlikely to keep pace with inflation, investors may need to take a longer-term view by, for example, having a part of their portfolio in risky assets, such as equities.

“People have different goals. Some goals are more immediate and some are for the long term. So if yours is a long-term goal, you should find the right long-term asset class to invest in, and vice versa,” said Mr Lee.

“I know it may sound like general advice but you really need to consider all your assets and ask yourself what the money is for.”

Editor’s note: An earlier version of this story said that T-bills and SGS bonds can be bought or sold on the Singapore Exchange. Only SGS bonds can be traded on the Singapore Exchange. We apologise for the error.

Source: CNA/sk(cy)


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