What a week it’s been! Silicon Valley Bank and Signature Bank have both gone bust. First Republic Bank is on the brink but seems to have backing from other big banks. Over in Europe, Credit Suisse is also in danger but the Swiss authorities are stepping in to try to save it.
It seems that cracks are finally starting to show with rates rising at the such a fast pace. With fears of a systemic banking contagion spreading, the Fed might have to slow the pace of rate hikes or at least not to accelerate it.
Based on CME FedWatch Tool, the probability for the Fed to raise by 25 bps at the next FOMC on 22 March 2023 is now at 62% vs 38% for the Fed not to hike at all. Previously, there was some probability for even a 50 bps hike based on recent inflation data coming in slightly hotter than expected but that has gone away with news of the bank failures.
Consequently, Singapore SGS 10-year bond yields have tanked over the past month from almost hitting 3.5%, to now trending around 2.95%.
Since Singapore Savings Bonds (SSB) average 10-year yields follow SGS 10-year bond yields, next month’s SSB for May tranche should offer a much lower yield than this month’s SSB for April tranche of 3.15%. Although SSB yields are lower than T-bills, FD, cash funds, or bank savings accounts, with SSB you can lock-in rates for a longer period since its tenure is 10 years.
See also my SSB Tracker for more stats on SSB.
With bond yields expected to continue lower, now might be a good time to lock-in relatively higher yields for fixed income instruments like SSB and Fixed Deposits. Even Treasury Bills (T-bills) yields have fallen, with the recent 6-month T-bill auction on 16 March 2023 having a cut-off yield of 3.65%, considerably lower than the previous 3.98% just 2 weeks earlier. As at time of writing, RHB and HSBC are offering one of the highest FD rates of 3.9% (RHB offers longer tenures).
See my Fixed Income Tracker for the latest (selected) T-bill, SSB, FD and bank savings account rates.
Will you be trying to lock-in current rates and with which products?
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