Weekly recap: 6-month T-bill vs 50-year SGS bond vs SSB: Which is better?

If you’re looking to earn a higher yield on your savings, there are several options for you to choose from this coming week.

On Monday 28 August, we will see applications closing for the Singapore Savings Bonds, which is offering 1-year return of 3.01% and a 10-year average return of 3.06%.  

On Tuesday, 29 August, we will see applications closing for the 50-year green SGS bond, which is offering a yield of 3.04%. 

Lastly, the next 6-month Singapore T-bill auction will take place on 31 August. After the cut-off yield fell to 3.73% in the previous auction, the closing yield on the 6-month T-bill has remained at about the same level.

Amongst the three bonds, the SSB offers the most flexibility as investors can redeem their funds anytime.

On the other hand, investors of the 6-month T-bill and 50-year SGS bond face the risk of capital loss if they choose to sell the bond before it matures. Clearly, this may be less of an issue for the 6-month T-bill compared to the 50-year SGS bond. 

As such, we discuss why investors need to be aware of the interest rate and liquidity risks of the 50-year SGS bond.

With higher bond yields, Singapore REITs continue to face pressure from higher financing costs and lower asset valuations. 

We analyse what WeWork’s warning of possible bankruptcy would mean for office REITs. 

Also, we dive into what’s next for Manulife US REIT after the REIT breached a financial covenant and halted its distributions. 

📈 STAYING THE COURSE ON RATE HIKES

What happened? 

Fed Chairman Jerome Powell said at the Jackson Hole symposium that the Fed is prepared to raise interest rates further and keep them elevated if needed to fight inflation.

What does this mean?

US bond yields rose as investor concerns about higher for longer interest rates grew. 

The 2-year US government bond yield, which is sensitive to changes in Fed interest rate decisions, rose to as high as 5.09%.

The 10 year US government bond yield closed the week at 4.24%, after having reached the highest level since 2007 earlier in the week. 

Why should I care? 

Higher bond yields have led to selling pressure in stocks in recent weeks, even as the improved sentiment towards big tech and AI stocks has provided some relief. 

Some banks in Singapore have started raising fixed deposit rates, with the best 12-month fixed deposit rate now at 3.55%. 

💡 THE BIG IMPORTANT STORY

Is DBS still a better buy than UOB and OCBC after the CEO share sale?

Here’s why DBS has been preferred by investors looking to buy Singapore bank stocks.

🚗 WHAT'S MOVING

• Nvidia (NVDA) reported stronger than expected revenue and earnings as demand for AI chips accelerated. The company also provided optimistic guidance on the current quarter, with sales expected to rise 170% compared to the previous year. 
• Grab (GRAB) narrowed its net loss to US$135 million in the second quarter, and brought forward its target to achieve group adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) breakeven by the third quarter of this year, earlier than the previous target of fourth quarter. 
• Singtel reported a net profit of $483 million for the quarter ending 30 June, 23% lower than the previous year. The fall in profit was driven by a net exceptional loss from its associate Bharti Airtel, which recorded significant foreign exchange losses.

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

🤝 LAST FEW DAYS 

Promotional deals ending in August: OCBC credit cards, POEMS SMART Park, Moomoo SG and more

🤓 WHAT WE’RE LOOKING OUT FOR THIS WEEK

• Monday, 28 Aug: Singapore Savings Bonds application closing date
• Tuesday, 29 Aug: 50-year green SGS bond application closing date
• Thursday, 31 Aug: Singapore 6-month T-bill auction
• Friday, 1 Sep: Singapore Presidential Elections, US non-farm payroll data

Source: Bloomberg, SGX