Time to lock in high interest rates? Weekly recap and what to watch in the week ahead

The US Fed raised interest rates by another 0.25% this week, but investors are already looking ahead to what could come next. 

Many are expecting that we will start to see a pause in rate hikes after the latest increase, with some even forecasting cuts in the second half of this year. 

We’ve already seen interest rates falling in the latest Singapore Savings Bonds issuance. 

Likewise, fixed deposit rates have been coming down in recent months. 

Thankfully we have yet to see a cut in the interest rates for savings accounts, with the highest effective interest rates offered still above 5% p.a.  

Whether you decide to put your cash into savings accounts, fixed deposit, cash management accounts, T-bills or SSBs, we hope our guides will help you to make a better financial decision! 

✋ A Fed pause coming up?

What happened? 

The US Federal Reserve (Fed) raised interest rates by another 0.25%, bringing the benchmark federal funds rates to 5% to 5.25%.

The Fed also hinted at a pause in its aggressive rate hikes.

What does this mean?

Fed Chairman Jerome Powell commented that Fed’s next steps will be driven by various economic data, particularly whether we see a moderation in inflation.

Powell also suggested that the central bank was unlikely to cut rates this year.

However, investors widely expect that we will start to see a cut in the second half of this year. 

Why should I care? 

With the expectation that the Fed might starting to pause on its rate hikes, we have seen government bond yields coming down in recent months.

Read our full analysis on what it means for your savings and investments

🚗 WHAT'S MOVING

• Apple (AAPL) beat analyst revenue and earnings forecasts in the latest quarter, driven by better than expected sales for its iPhone. 
• US regional banks tumbled on renewed concerns about rising financial stress. Bloomberg reported that PacWest Bancorp was considering various strategic options including a sale. First Horizon (FHN) saw selling pressure after Toronto Dominion Bank called off its $13.4 billion acquisition, citing a lack of clarity on when they would get regulatory approvals.
• DBS reported a profit of S$2.57 billion in the first quarter, a 43% increase compared to the previous year and above consensus expectations. The higher profit was driven by an improvement in net interest income with higher interest rates, and resilient asset quality. DBS declared an interim dividend of 42 cents per share.
• Keppel Corp plans to significantly scale its assets under management (AUM) from $50 billion at end-2022 to $100 billion by end-2026 and S$200 billion by 2030. This is intended to drive its transformation into a global alternative asset management with deep operating capabilities.
• CapitaLand Integrated Commercial Trust reported a net property income of S$276.3 million in the first quarter, a 11.3% increase compared to the previous year. Its income was boosted by contributions from the acquisitions of a 70% stake in CapitaSky and 3 Australian assets, as well as higher income from existing properties.

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

💡 THE BIG IMPORTANT STORY

SSB 10-year average return falls to 2.81%. Still worth applying?

The 1-year and 10-year average return on the latest Singapore Savings Bonds (SSB) have fallen to below 3%.

🤓 WHAT WE’RE LOOKING OUT FOR THIS WEEK

• Tuesday, 9 May: Lendlease Global Commercial REIT operational update
• Wednesday, 10 May: OCBC results, US CPI data
• Thursday, 11 May: CapitaLand Investment results, Singapore 6-month T-bill auction
• Friday, 12 May: Seatrium results

Source: Bloomberg, SGX 

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🍭 THAT’S INTERESTING

Charlie Munger said that value investors should be prepared to get smaller returns as competition intensifies at the Berkshire Hathaway annual meeting. However, Warren Buffett believes that there are still opportunities with "other people doing dumb things". He said that "in the 58 years we’ve been running Berkshire, I would say there’s been a great increase in the number people doing dumb things, and they do big, dumb things."

Source: CNBC