Best Fixed Deposit Rates in Singapore yield 3.75% – Where to put cash for yield today – T-Bills vs Money Market Funds vs Singapore Savings Bonds vs Fixed Deposits (May 2024)

Interest rates have been all over the place of late.

If you recall – in Jan the market was pricing in 7 interest rate cuts in 2024.

With hot US inflation and latest comments from Powell, the market is now only pricing in 2 interest rate cuts in 2024.

Despite all that, bank fixed deposit interest rates keep dropping.

And yet the most recent 6-month T-Bills interest rates closed at 3.7% – significantly higher than most bank fixed deposits.

3 things I wanted to discuss today:

1. Best fixed deposit rates in Singapore today (May 2024)
2. Will interest rates go up or down in 2024?
3. Where to park your cash for yield / liquidity today – T-Bills, Fixed Deposit, Money Market Funds, Singapore Savings Bonds and Savings Accounts etc.

Best Fixed Deposit Rates yield 3.35% if you deposit directly with the bank (as of May 2024)

The latest list of Fixed Deposit rates are set out below.

To summarise, the best fixed deposit option if you deposit directly with the bank are:

Best Fixed Deposit Rates yield 3.75% if you deposit via Syfe (to get institutional fixed deposit rates) (as of May 2024)

If you’re slightly more adventurous – you can use Syfe Cash+ Guaranteed.

Basically you park the cash with Syfe, who will then deposit the cash into a bank fixed deposit.

This allows you access to institutional fixed deposit rates which are significantly higher than the retail rates above.

If you go down this path, these are the latest interest rates on offer:

• 3 months – 3.75%
• 6 months – 3.75%
• 12 months – 3.6%

Just for fun this was the interest rates 1 month ago.

Notice how the short term (3 or 6 month) rates have dropped from 3.8% to 3.75%, as the market prices in rate cuts in 2024.

While the 12 months has gone up from 3.5% to 3.6%, as the market prices in less rate cuts going forward.

Comparing interest rates for T-Bills vs Fixed Deposits vs Syfe Cash+ Guaranteed (May 2024)

Compared the 3 options below:

You can see how T-Bills and Syfe Cash+ Guaranteed are more attractive vs conventional fixed deposits.

Money Market Funds (like MariInvest) offer decent yields too at 3.5% – 4.0%, coupled with T+1 liquidity.

So they’re a decent alternative to fixed deposits and T-Bills, but the yields do fluctuate over time and cannot be “locked in”. They are also technically not risk free.

Do note – Syfe Cash+ Guaranteed (and money market funds) is NOT SDIC insured

To be absolutely clear though, Syfe Cash+ Guaranteed (and money market funds) is NOT SDIC insured.

This means that unlike T-Bills (backed by Singapore government) or Fixed Deposit (SDIC insured up to $100,000), Syfe Cash+ Guaranteed is NOT risk free.

This is made clear by Syfe on their website:

The cash (for Syfe Cash+ Guaranteed) is parked in fixed deposits with the underlying bank.

But if the bank goes under, Syfe as a whole would only be insured up to $100,000, which may not be sufficient to cover the losses.

Whereas if you park the cash with the bank directly yourself, you are SDIC insured up to $100,000 (SDIC limits have gone up on 1 April).

So I leave it to individual investors to decide if they are fine with this risk, or they prefer something absolutely risk free for peace of mind.

Best Fixed Deposit Rates yield 3.35% for 6 months – if you deposit directly with the bank (as of May 2024)

Latest list of Fixed Deposit rates are set out below (bold being the most attractive for each tenure).

After the table I’ll share my views on:

1. Are interest rates going up or down?
2. Where to park your cash for yield / liquidity today – T-Bills, Fixed Deposit, Money Market Funds, Singapore Savings Bonds and Savings Accounts etc.

Will fixed deposit interest rates go up or down in 2024?

Here’s what is priced into the market as of today:

1. 2 interest rate cuts in 2024
2. With the first interest rate cut in Sep 2024 (followed by Dec 2024)

But it’s fairly clear from the past 12 months that nobody has any clue how interest rate cuts are going to play out.

Where we are today – with all the uncertainty over how inflation will move going forward.

And all the uncertainty over how Jerome Powell or Janet Yellen are going to react in a US election year.

I would take the above with a healthy pinch of salt.

So it would be prudent to spread out your cash over a different range of maturities, just in case there are any surprises on interest rates (to the upside / downside).

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Singapore Savings Bonds are actually more attractive that fixed deposits for tenure more than 6 months – 3.26% yield for first year

Note that this month’s Singapore Savings Bonds are actually very attractive.

Yields on the Singapore Savings bonds are:

• 3.26% for the first 6 years
• 3.33% for 10 years

This is very attractive and higher than fixed deposits once you hit the 12 month and beyond mark.

With the added benefit that you can lock in the interest rates for 10 years.

To the point that I would expect very strong demand for Singapore Savings Bonds this month.

Note that each person can apply for up to $200,000 Singapore Savings Bonds.

But given what is likely to be strong demand for these Singapore Savings Bonds, I’m not sure you’ll see full allotments.

T-Bills, Fixed Deposit, Singapore Savings Bonds and Savings Accounts? How to split cash between these options?

At a high level, these are the options available to you today for a cash / low risk investment:

What to ask yourself – split cash between T-Bills, Fixed Deposit and Savings Accounts?

A lot of you have asked what to consider when deciding how much cash to split between each of the following options:

1. T-Bills
2. Fixed Deposits
3. Money Market Funds
4. High Yield Savings Accounts

The way I see it, it’s broadly a 2 step process:

1. How much liquid cash do you need?
2. Rest goes into highest yield options – based on your comfort level on risk

Key question to ask – how much liquid cash do you need?

I would say the key question to ask is how much liquid cash you need, to meet your spending needs the next 6 months.

Think about how much you need to spend.

Then think about how much cash you are expecting to come in over the next 6 months.

The difference is the amount of liquid cash you would need.

So if all of your spending needs are going to be met by your salary, or if a big bonus is coming in – then you can actually run very little liquid cash.

Whereas if you’re going to buy a house, a new car, or a big renovation, you’ll need to plan ahead and have that amount of cash set aside in liquid cash.

Some guidelines on liquidity – better safe than sorry

As a general note I would say don’t be stingy with liquidity.

It’s one of those where it’s better to be safe than sorry.

So after you run the analysis above – you’ll want to buffer for unexpected scenarios too.

For example a big medical bill that you need to pay upfront, then claim from insurance after.

A big car repair bill.

A decline in stocks that leads you to want to buy some stocks / REITs.

A loss of job, meaning no income in the short term.

Things like that.

As a general note I would say you always want to have enough liquid cash on hand to cover 6 months worth of expenses, as a worst case scenario.

Liquid Cash should go into options accessible on short notice – savings accounts, fixed deposits, money market funds

Once you have the number above.

That amount of liquid cash, should go into options that you can get back with ideally a day or two’s notice.

That will include:

1. High yield savings accounts (eg. UOB One, OCBC 360) – as a savings account you can withdraw any time
2. Fixed Deposits – can break anytime by telling the bank, although you will lose accrued interest
3. Money Market Funds – they are T+1 liquidity

Number (1) tends to have the highest interest rates, although with the recent change UOB One Account now only pays 4.0% on $150,000.

That said it’s still higher than T-Bills, for a savings account you can withdraw any time.

But I still think this should be the priority – and you shouldn’t move on to fixed deposits or money market funds until you’ve maxxed out this option / set aside sufficient liquidity.

Singapore Savings Bonds is an outlier, because technically the money only comes back at the start of the next month.

In a worst case scenario if you just missed the redemption window, you might need to wait a whole month to get the money back:

I would say some Singapore Savings Bonds is fine as you can get the money back reasonably quickly, but don’t overdo it and put 90% of your liquid cash into Singapore Savings Bonds.

Rest of the cash goes into highest yield options – based on your comfort level on risk

Once you have the above – the rest just goes into the highest yielding option.

As of today, that’s probably T-Bills, followed by Money Market Funds like MariInvest or Fullerton SGD Cash Fund.

But Money Market Funds are technically not risk free, so I know not everyone is comfortable putting their entire nest egg into something that is not zero risk.

In which case you can consider overweighting T-Bills.

But… how much cash to hold, vs stocks or REITs or real estate?

Do note that the discussion above only addresses where to put your cash.

It doesn’t address the question of how much cash to hold, vs stocks or REITs or real estate.

That’s a much harder question (that we try to answer on the rest of Financial Horse).

But long and short, I would say it depends on 2 factors:

1. Individual risk appetite
2. Market conditions

Individual Risk Appetite

Individual risk appetite is how much risk you can take.

If you’re a 62 year old approaching retirement, the amount of risk you can take is very different from a 25 year old starting his career.

Life goals matter too.

If you’ve saved up over a lifetime and finally have enough to afford a comfortable retirement, you may not want to put all that into high risk stocks and risk losing it all.

Whereas if your current capital is very low, you might not mind taking on higher risk for the chance to get great returns.

How much risk to take – only you can answer this question for yourself.

Market conditions

The other factor to consider is market conditions.

Yes I know this is market timing and all.

But I would say there are some times in markets like March 2020 or 2008/2009.

That as long as you have enough cash set aside for spending needs and contingencies, it probably makes sense to increase risk exposure given how cheap valuations are.

And vice versa.

But I know not everyone is comfortable with market timing, and some prefer to just dollar cost average regardless of market conditions.

In which case you can ignore this factor and focus on risk appetite above.

This article was written on 10 May 2024 and will not be updated going forward.

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