Interest rates to stay higher for longer?

The Federal Reserve raised its benchmark interest rate again this week. This has significant implications to both our investments and savings. 

Firstly, government bond yields have continued to climb. We share one of the ways you can tap on the higher US dollar interest rates here. 

With the cut-off yield on the latest Singapore 1-year T-bill rising to 3.74%, we examine if it is worthwhile subscribing to the upcoming 6-month T-bill auction on 3rd August. 

If you are looking to tap on higher interest rates on savings accounts,  the promotional interest rate of 3.5% p.a. for new customers of the CIMB FastSaver Account will be ending on 31st July. 

Lastly, with the Singapore earnings season in full swing, we look at the recent results of Keppel DC REIT and Parkway Life REIT to examine if they might be worth adding to your portfolios. 

📈 FED HIKES AGAIN

What happened? 

The US Federal Reserve has raised its benchmark interest rate by another 0.25%, bringing the rate to the highest level in more than 22 years. 

What does this mean?

As the latest hike was widely expected by the market, what investors were looking out for was whether the Fed will signal further rate hikes in the coming months.

At the press conference, Powell left open the possibility of further hikes but emphasised that it will depend on incoming data in the coming months.

However, investors are currently expecting that the most recent rate hike will be the last one this cycle.

Why should I care? 

Following the latest Fed rate hike, US government bond yields moved higher and US stocks continued to rally. 

We analyse how the latest rate hike could impact T-bills, fixed deposits and stocks here. 

💡 THE BIG IMPORTANT STORY

Will the T-bill yield rise after the Fed rate hike?

The closing yield on the Singapore T-bill has risen slightly following the US Fed rate hike.

🚗 WHAT'S MOVING

• UOB reported a net profit of S$1.4 billion in the second quarter, driven by higher net interest income, and trading and investment income. The bank declared an interim dividend of S$0.85 for the first half of the year, representing a dividend payout ratio of 49%. 
• Singapore Airlines reported a record net profit of S$734 million for the first quarter of its current financial year, supported by an increase in passenger traffic and load factors across all markets. SIA and Scoot carried 8.4 million passengers during the quarter, 65.5% higher than the previous year.
• Keppel Corp reported a record headline profit of S$3.6 billion in the first half of 2023, as earnings were supported by a S$3.3 billion disposal gain from the sale of its offshore and marine business. The company declared an interim cash dividend of 15 cents per share, as well as a proposed distribution of one Keppel REIT unit for every five Keppel Corp shares held to mark its 55th anniversary. 
• Keppel DC REIT reported a distribution per unit (DPU) of 5.051 cents for the first half of 2023, stable from the previous year. The REIT’s portfolio occupancy was maintained at 98.5% as at 30 June 2023, while gearing fell slightly to 36.3% from 36.8% in March 2023. Read our analysis here.
• Meta (META) reported revenue in the second quarter that beat estimates, and issued a positive guidance driven by a rebound in digital advertising.

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

🤝 A MESSAGE FROM OUR PARTNER

How to earn an attractive yield of 4.5% p.a. on your idle cash

The FSMOne USD Auto-Sweep Account allows you to earn a potentially higher yield compared to most USD savings accounts, while offering the flexibility to buy into investment products available on FSMOne with no lag time.

🤓 WHAT WE’RE LOOKING OUT FOR THIS WEEK

• Monday, 31 Jul: Mapletree Pan Asia Commercial Trust earnings
• Tuesday, 1 Aug: Frasers Logistics & Commercial Trust, CapitaLand Integrated Commercial Trust earnings
• Wednesday, 2 Aug: Paypal earnings
• Thursday, 3 Aug: Singapore 6-month T-bill auction, DBS, Apple, Amazon earnings
• Friday, 4 Aug: OCBC, Sembcorp Industries, Venture Corp earnings, US nonfarm payrolls data

Source: Bloomberg, SGX