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THE yield of the 10-year Singapore Government Securities (SGS) has plunged below 2 per cent as it tracks the southbound 10-year US Treasury on growing speculation that interest rate hikes will be delayed.
SGS investors have been doing well. As the 10-year SGS yield on Tuesday fell to 1.99 per cent from Monday's 2.09 per cent, the price rose 0.8 per cent to 108.79. Bond prices rise when yields fall, and vice versa. The 10-year SGS has a 3 per cent coupon.
Clifford Lee at DBS Bank of fixed income said the 10-year SGS is tracking the UST 10-year where the yield has dropped to 1.88 per cent from 2.17 on Dec 31, 2014.
"The general consensus is that the US Federal Reserve will hike interest rates only by Q3, there are some pockets which think it won't do so this year," said Mr Lee.