Wednesday, September 30, 2015

Singapore Savings Bond: Guessing Next Month's Yield (Nov 2015 issue)

Earlier this month, I wrote a post on why I think the next SSB issue will have a higher yield than the current issue.

So since this is the end of the month, I went over to MAS and downloaded the statistics of the benchmark bond yield rates.

As you can see, based on the average yields this month, one might expect close to a 20bps raise on the front end of the curve and 9 bps on the belly and 14bps on the tail end if the relationship of estimating the previous month's average yield holds true.

For me, it's a bit strange to see that the 1 year and 2 year yields are so close to each other. Also, look how the front end has been rising the whole month, but how the tail end actually collapsed in the last week!

The yield curve is an interesting indicator, but I've yet to come across any source that has ever mentioned it in relation to the Singapore markets. Perhaps if I'm free one day I can try and do a study on that.

With the front end rising, the SSB as a cash alternative reduces the attractiveness of rolling over fixed deposits by a lot! Perhaps I will apply for some next month. We will see what yield will be announced very soon :)

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