How to gain from high interest rates

The first half of 2023 is over. 

As we enter the second half of 2023, there are signs that the U.S. is not likely to cut its interest rates anytime soon. 

This has translated to elevated yields on the Singapore T-bill as well. 

If you're interested in the 6-month T-bill, we analyse if it might be worthwhile applying for the upcoming T-bill auction on 6 July 2023. 

For those who’d prefer a T-bill with a longer maturity, we compare the 6-month T-bill with the 1-year T-bill. 

To get expert insights on how to position your portfolio in the second half of 2023, sign up for the iFast Mid-Year Review on 8 July 2023 

🪜 U.S. BOND YIELDS KEEP CLIMBING

What happened? 

U.S. bond yields rose further after strong economic data led to expectations that there might be more rate hikes by the U.S. Federal Reserve. 

What does this mean?

The U.S. economy has defied widespread expectations and seems to have averted a recession for now. 

Firstly, GDP growth in the first quarter was revised upwards to 2.0%, significantly higher than the previous estimate of 1.3%. 

The U.S. labour market also continued to be healthy, with reported layoffs below market forecasts. 

Why should I care? 

The strength of the US economy may mean that the Federal Reserve is unlikely to bring down interest rates anytime soon.

This has also kept the yield on the Singapore 6-month T-bill elevated. Read our analysis here.

💡 THE BIG IMPORTANT STORY

Is the 1-year T-bill better than the 6-month T-bill and fixed deposits?

The yield on the 6-month T-bill is currently higher than the 1-year T-bill, but you may face re-investment risk if interest rates were to fall sharply. 

🚗 WHAT'S MOVING

• Nvidia (NVDA) and other semiconductor stocks saw a brief sell-off after the Wall Street Journal reported that the Biden administration was looking at possible new restrictions on exporting artificial intelligence chips to China. 
• Singapore Airlines fell after Reuters reported that Temasek is selling around S$400 million worth of shares. Read our analysis here.
• Yangzijiang Shipbuilding secured US$5.6 billion of new orders in the first half of 2023, bringing its order book to a record high of US$14.6 billion. Read our analysis here.
• Cromwell European REIT (CEREIT) has completed the divestment of Milan office asset Piazza Affari 2 for $138.5 million, representing a EUR 200,000 premium above its recent valuation in June. The divestment would increase CEREIT’s FY2022 distribution per unit on a pro-forma basis by 2.1%. 
• Sabana Industrial REIT will hold a EGM on 4th August to vote on the removal of the manager of the REIT, after activist investment Quarz Capital requisitioned the EGM.

Source: Bloomberg, CNBC, Financial Times, Business Times, Edge Singapore

🤝 A MESSAGE FROM OUR PARTNER

Join the iFAST Mid-Year Review 2023 to gain insights into investment prospects in the current market, and the best ways you can implement these ideas into your portfolio.

Some of the topics lined up include:
- Don't know where to invest in a recession? Here are some ideas that could outperform
- Want to invest in Artificial Intelligence? Here’s the best way to do it
- Who will be the next Asian Tigers?

Stand a chance to win lucky draw prizes worth over S$3,000! Register for free here

🤓 WHAT WE’RE LOOKING OUT FOR THIS WEEK

• Tuesday, 4 Jul: U.S. markets closed  
• Wednesday, 5 Jul: U.S. FOMC meeting minutes
• Thursday, 6 Jul: Singapore 6-month T-bill auction
• Friday, 7 Jul: U.S. Non-farm payroll data
• Saturday, 8 Jul: iFast Mid-Year Review 2023

Source: Bloomberg, SGX 

🍭 THAT’S INTERESTING

Prices for Singapore hotel and airfares has spiked in March 2024 in anticipation of Taylor Swift’s The Eras Tours concerts in Singapore. During the period when the international pop star is expected to hold six concerts between 2 March and 9 March 2024, room rates have jumped by more than 20% at some three and four star hotels in Singapore. For example, a night’s stay at the Parkroyal on Beach Road will cost S$478 during that period, 23% more than seven days before. 

Read our guide on how to maximise your chances of getting a UOB card in time for the pre-sale on 5th July.

Source: The Business Times