Interest rate cuts may be coming: Weekly Recap

It really feels like interest rate cuts might be on the horizon. 

With inflation easing, Fed Chairman Jerome Powell mentioned this week that “the time has come for policy to adjust,” signaling that a shift might be closer than we think.

While there have been growing indications that interest rates could be cut soon, what truly surprised me was how quickly fixed deposit rates have been falling. The best six-month fixed deposit rate dropped to 3.25% p.a. this week—a significant decline.

So, what does this mean for the upcoming T-bill auction on 29 August, especially after the yield plunged to 3.34% in the previous auction? We’ll dive into the details and see what might be in store.

On a personal note, I’m looking at locking in interest rates with the latest Singapore Savings Bonds (SSB) issuance, which offers a 10-year average interest rate of 3.1%. 

With talk of “higher for longer” interest rates fading, now might be the perfect time to take action and make the most of these opportunities while they’re still here.

Happy growing!

Gerald, Founder of Beansprout

⏰ This week in markets

🚀 Close to all-time highs

What happened? 

US Federal Reserve Chairman Jerome Powell indicated that ‘the time has come for policy to adjust’, which was seen by investors as a sign that the Fed may cut interest rates soon.

This comes after consecutive months of easing inflation, with the US consumer price index (CPI) rising at a slower than expected pace in July.

In Singapore, core inflation rose by 2.5% in July, representing the slowest pace of increase in more than two years. 

What does this mean?

Investors gained in confidence that the Fed will cut interest rates in its upcoming meeting in September.

According to the CME Fedwatch Tool, investors are assigning close to 100% probability that interest rates will be cut next month. Some are also expecting the Fed to cut interest rates aggressively by 0.5% in September.

Why should I care? 

Global stocks continue to soar on rate cut hopes, with the S&P 500 closing at just below its all-time high recorded in mid-July. However, US government bond yields declined.

Singapore REITs also bounced with lower bond yields, with gains led by Lendlease REIT, Keppel REIT and CDL Hospitality Trust. 

We recently spoke to the CEO of Lendlease REIT to understand its prospects. Watch Lendlease REIT’s presentation and our discussion here. 

Check out our Singapore REITs screener to find the best REIT for your portfolio. 

🚗  Moving this week

• SATS reported 1Q FY25 net profit of S$65m, reversing from a loss of S$30m in 1Q FY24 and improving from a profit of S$33m in 4Q FY24. Key drivers were increased demand for inflight meals and higher air cargo volume. Read our analysis on SATS earnings here.
• Singtel is partnering with Bridge Alliance to offer GPU-as-a-service in South-east Asia. This is a cloud-based solution that offers access to graphics processing units, a type of AI chip, on demand.
• Jardine C&C is selling its entire 25.5% stake in Siam City Cement (SCC) at THB160 per share for US$346m cash to SCC’s controlling shareholder, the Ratanarak Group.
• Sembcorp Industries signed Heads of Terms with Nippon Yusen Kabushiki Kaisha to transport green ammonia supply from its proposed project in India to Japan.
• Keppel, ADB and Enterprise Singapore signed a MOU to jointly explore US$800m worth of energy transition, environmental sustainability, and blended finance opportunities in Asia and the Pacific region.

Source: Bloomberg, CNBC, Business Times, Edge Singapore

💡 The big important story

Here’s what to expect for the T-bill auction on 29 August

The closing yield on the 6-month Singapore T-bill is at 3.34%.

🤓 What we're looking out for next week

• Tuesday, 27 Aug: SGX Academy Webinar: Singtel backs merger of Intouch and Gulf: Paving new avenues of growth?, SSB application closing date
• Wednesday, 28 Aug: Nvidia earnings
• Thursday, 29 Aug: US GDP growth data
• Friday, 30 Aug: US PCE index data

Check out the full list of Singapore stocks, REITs and ETFs with upcoming dividend payments with our dividend calendar.

Source: SGX, Bloomberg, Refinitiv

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