T-bill yield dives and stocks fall on recession worries: Weekly Recap

I was surprised by the sharp decline in the T-bill yield this week. 

While I expected the downward trend to continue, the cut-off yield for the 6-month Singapore T-bill took a significant dive to 3.4% in the latest auction. 

This drop aligns with the global fall in bond yields as fears of an economic slowdown grow.

On the bright side, we haven’t seen a similar decline in interest rates for fixed deposits and savings accounts—at least for now. 

The best 3-month Singapore dollar fixed deposit rate still stands at 3.50%, and the best 6-month US dollar fixed deposit rate remains high at 5.0%. 

Most banks have also kept their savings account interest rates unchanged for August.

The 10-year average return on the latest Singapore Savings Bonds (SSBs) has only dipped slightly to 3.1%. 

If you’re wondering where to park your cash, I’ve compared these instruments to help you find a higher yield for your savings.

Amidst the falling interest rates, Singapore REITs have bounced back from their lows. If you’re wondering whether it’s time to invest in REITs, join me for a free webinar on 7 August where I’ll share my outlook on the sector.

Gerald, Founder of Beansprout

⏰ This Week In Markets

⛔️ Recession Concerns Resurface

What happened? 

Latest economic data in the US point to slowing growth, driving concerns that elevated interest rates may lead to a recession. 

The US added 114,000 jobs in July, below market expectations for a 175,000 increase. At the same time, the unemployment rate unexpectedly rose to 4.3%, a near three-year high. 

A measure of US manufacturing activity also fell to a 8-month low in July amid a slump in new orders. 

What does this mean?

The weakness in the economic data led some investors to think that the US Federal Reserve has been too slow in cutting interest rates, and will have to take more drastic action in the upcoming meetings.  

According to the CME Fedwatch Tool, the Fed is almost certain to cut interest rates in the upcoming meeting in September. In fact, there is now a 22% probability that the Fed will cut interest rates by 0.50% (50 basis points) in September. 

Why should I care? 

The S&P 500 fell sharply with losses led by tech stocks with growing fears of an economic slowdown. 

At the same time, US government bond yields declined, with the 10-year bond yield falling to 3.8% from about 4.2% just a week ago. 

Singapore REITs mostly posted gains as bond yields fell. The top perfomers amongst the REITs were Keppel DC REIT (+7.9%), Frasers Logistics & Commercial Trust (+4.6%) and CapitaLand Ascendas REIT (+4.5%)

🚗  Moving This Week

• SIA 1Q FY24/25 net profit fell 38.5% year-on-year to S$452m. The higher traffic was partially offset by lower yields, while higher fuel price drove cost higher. Read our analysis of SIA earnings here. 
• UOB’s 2Q24 net profit rose 0.8% year-on-year to S$1,426m, but was 4.0% lower than 1Q24. Net interest margin rose to 2.05% in 2Q, versus 2.02% in 1Q24, but lower than 2.12% in 2Q23. It declared an interim dividend of 88 cents, 3 cents higher than 1H23. Read our analysis of UOB earnings here. 
• OCBC reported a 14% year on year growth in net profit to S$1.94 billion in the second quarter of 2024, driven by income growth and a decline in allowances. The company announced an interim dividend of 44 cents, up 10% or 4 cents from a year ago. Read our analysis of OCBC earnings here.
• Seatrium reported a net profit of S$36 million in the first half of 2024 (1H24), reversing a loss of S$264 million in the previous year. Excluding a one-off provision for the settlement to MH Wirth, underlying net profit in 1H24 would be S$115 million. Read our analysis of Seatrium earnings here.
• Mapletree Pan Asia Commercial Trust 1Q25 DPU was 4.1% lower year-on-year to 2.09 cents. This was impacted by a strong S$, market headwinds in Japan and China, and higher interest rates. Read our analysis of MPACT earnings here. 
• Capitaland Asendas REIT declared 1H24 DPU of 7.524 cents, 2.5% lower than 1H23, due to a higher unit base. Net book value rose marginally to S$2.27 per unit. Read our analysis of CapitaLand Ascendas REIT earnings here. 

Other reports:

• OUE REIT: Underrated growth potential

• Keppel Infrastructure Trust distributable income expected to be stronger in 2H24

• Keppel REIT DPU declines by 3.4% - Our Quick Take

• Keppel DC REIT DPU falls by 9.9%: Our Quick Take

Source: Bloomberg, CNBC, Business Times, Edge Singapore

💡 The Big Important Story

T-bill yield falls sharply to 3.4%. Why the decline?

The cut-off yield on the latest Singapore T-bill auction on 1 August fell to 3.4%.

🤓 What We're Looking Out For This Week

• Monday, 5 Aug: Paragon REIT earnings
• Tuesday, 6 Aug: Venture Corp, Sembcorp Industries earnings, SIAS Corporate Connect – Lendlease REIT
• Wednesday, 7 Aug: DBS earnings, Beansprout Webinar: Is the worst over for Singapore REITs?
• Thursday, 8 Aug: SGX earnings 
• Friday, 9 Aug: Singapore National Day Public Holiday

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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