Thursday, October 18, 2018

Temasek 5-year retail bond yield of 2.7% is not good. Why?

The US 2-year treasury yield is already at 2.895% but the Temasek 5-year retail bond yield is only at 2.7%.

As the US Fed is expected to increase interest rates 3x in 2019 and another 1x in 2020, the USD is expected to appreciate against Asian currencies.  Therefore, it is unlikely to suffer currency exchange loss from the USD.  It is better to invest in a shorter bond term so that investors can reinvest upon maturity to capture the higher interest rate.

All the factors make Temasek's 5-year retail bond looks like a not so good investment.
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4 comments:

  1. Eric HoOctober 18, 2018 at 5:11 PM

    https://www.investing.com/rates-bonds/u.s.-5-year-bond-yield

    The US 5-year bond yield is 3.065% now which is much better than Temasek's 2.7%.

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  2. Eric HoOctober 19, 2018 at 11:23 AM

    It is highly possible that Temasek cannot find enough institutional investors and fund managers to take up its bonds that it has been forced to open up to retail investors since there is an exodus of foreign investors from Asia.

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  3. Eric HoOctober 19, 2018 at 11:29 AM

    https://sg.finance.yahoo.com/news/foreigners-sell-asian-bonds-september-rising-u-yields-075732132--sector.html

    Asian bonds like Temasek's bonds will suffer from liquidity issues because investors are chasing after higher yields in the USA.

    ReplyDelete
  4. Eric HoOctober 19, 2018 at 5:07 PM

    https://www.businesstimes.com.sg/banking-finance/fitch-solutions-forecasts-singdollar-averaging-s135-against-usd-in-2018-s138-against

    This forecast corroborates our analysis that you will unlikely to suffer from currency exchange loss if you invest in short-term USD bonds instead of going after Temasek's 2.7% bond.

    ReplyDelete