No end to inflation worries

Inflation concerns are starting to come back!

In the US and Singapore, inflation has continued to climb in January, leading to renewed worries that price increases will remain persistent. 

However, this could also be good news for the savers amongst us.

We take a look at whether the sharp increase in US government bond yields might mean higher yields for the upcoming 6-month T-bill auction on 2 March. 

If you've been investing in government bonds and wonder if it might be easier to do so via a bond ETF, we assess how the ABF Singapore Bond Index Fund compares to the T-bill and SSB. 

🔥 Inflation’s still running hot

What happened? 

US Personal Consumption Expenditure (PCE) core inflation was at 4.7% in January, much higher than market expectations. 

What does this mean?

The strength in the Fed’s preferred measure of inflation led some investors to forecast that the central bank would have to be more aggressive in its interest rate hikes. 

Earlier, minutes from the Fed’s January meeting showed that “a few” members had wanted a 0.50% rate hike rather than the 0.25% increase announced to show greater resolve in bringing down inflation.

Closer to home, Singapore’s core inflation rose to 5.5% in January, the highest since November 2008, as the GST hike pushed prices up. 

Why should I care? 

US stocks had a tough time as the S&P 500 and Nasdaq had their worst week since December last year. 

At the same time, bond yields rose as investors expect interest rates to remain higher for longer. The US 10 year government bond yield closed the week at 3.95%, climbing sharply from around 3.4% at the start of the month. 

🚗 WHAT'S MOVING

• Nvidia (NVDA) reported stronger than expected revenue and earnings for the fourth quarter. While some investors expect AI opportunities to be the next potential growth driver for the company, find out why this analyst thinks that the positives are already in the share price.

• Alibaba (BABA) reported stronger than expected revenue as China’s re-opening helped to boost consumer sentiment and spending. Efforts to control costs also led to stronger profit. 

• Keppel traded ex-div after Sembcorp Marine shareholders voted in favour of the proposed combination between Sembcorp Marine and Keppel Offshore & Marine. Here's what you need to know as a Keppel shareholder.

• SATS announced that it will issue 363.1 million new shares at S$2.20 per share to raise approximately S$798.8 million via a renounceable underwritten rights issue to fund the acquisition of Worldwide Flight Services (WFS).

• Singapore banks reported mixed fourth quarter results. UOB and OCBC reported higher earnings supported by higher net interest margins, but this was partly offset by higher provisions. 

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

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💡 THE BIG IMPORTANT STORY

Will the T-bill yield rise above 4% in the upcoming auction on 2 March?

The Singapore 6-month government bond yield has not risen as sharply as US government bond yields in recent weeks.

🤓 WHAT WE’RE LOOKING OUT FOR THIS WEEK

• Monday, 27 Feb: Raffles Medical Group results
• Tuesday, 28 Feb: Sembcorp Marine results; Expected completion of combination between Keppel Offshore & Marine and Sembcorp Marine
• Wed, 1 Mar: Expected crediting of SMM shares to eligible Keppel shareholders, Nio results
• Thur, 2 Mar: SGX Academy webinar: Dividend investing strategies, Singapore 6-month T-bill auction

Source: Bloomberg, SGX 

🍭 THAT’S INTERESTING

Singapore’s resident total fertility rate fell further to 1.05 in 2022, the lowest on record based on data going back more than six decades. The total fertility rate refers to the average number of live-births each woman would have during her reproductive years. South Korea has the world’s lowest total fertility rate at 0.78 in 2022. 

Source: Bloomberg