Dear readers, new opportunities for investors has come! And this is even before the US Federal Reserves cuts interest rates as many have expected! Why do I say this? Well, a new normal in interest rates has come!
I am not sure whether you have noted the cut-off yield of the latest Singapore 6-month T-bill, BS24117F which closed as at the auction date of 29 Aug 2024: 3.13% per annum!
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The above cut-off yield has marked a new normal in the interest rates as the quantum of short-term interest rates has not reached such a low point in recent years. For those who have not been following the trend in interest rates, one could have been forgiven for thinking that the 3.13% per annum belongs to the 10-year Singapore Savings bonds!
To see how far we have come to 3.13% per annum, do you recall that just around one year ago, the T-bill, BS23119H, auction date: 28 Sep 23; provided investors with cut-off yield of 4.07% per annum?
Starting from Jun 24 Singapore T-bills, the cut-off yields of T-bills has been on a steady decline:
BS24111X, auction date: 6 Jun 24; cut-off yield of 3.76% per annum
BS24112W, auction date: 20 Jun 24; cut-off yield of 3.74% per annum
BS24113N, auction date: 4 Jul 24; cut-off yield of 3.7% per annum
BS24114V, auction date: 18 Jul 24; cut-off yield of 3.64% per annum
BS24115A, auction date: 1 Aug 24, cut-off yield of 3.4% per annum
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BS24116E, auction date: 15 Aug 24, cut-off yield of 3.34% per annum
BS24117F, auction date: 29 Aug 24, cut-off yield of 3.13% per annum
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I have always shared with readers that we should make hay while the sun shines. When interest rates are high, we should be securing and locking in for as long as possible, decently high interest rates. And this is why I have been buying into Singapore Savings Bonds rather than shorter-term T-bills even though average 10-year interest rates of Singapore Savings Bonds are generally lower than those of T-bills. My reason is to lock in higher interest rates for the longest term. Do you know that the latest Singapore Savings Bonds (SBOCT24 GX24100H) has an average 10-year yield of a much reduced 2.77% per annum?
It is normal for markets to move in cycles. Higher interest rates may be over but as the adage goes: one door closes but another door opens. Opportunities for investors will be in equities including dividend plays, bonds as more are expected to shift to these to seek higher returns. But higher returns come with risks (of capital loss) when it comes to equities, hence investors be warned!
There are also opportunities on the mortgage front as mortgage holders seek out lower interest-rate plans for refinancing.
Last but not least, do continue to build up an investment warchest to make good use of liquidity when the stock markets crash or correct!
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