Wolf Money(Singapore Savings Bonds Jan 2024 review plus interest rate outlook)

 

(Credit Sony Pictures; This is your Captain Phillips speaking, we are under attack from the Houthi)

The huge drop in Jan SSB’s yield came as a shock to me. If this is not shocking enough, I have more shocking news for you. Feb 2024 SSB’s yield will be missing its 3 handle, not even 2.9%, more likely between the range of 2.7-2.8% base on the lower yield seen on 10 years SGS bonds. The drop in SSB’s yield was substantial given the recent Dec issue(last month) was 3.4%. This month SSBs will be hotly pursued by yield-hungry savers. The closing date for this month SSBs fall on the 26th Dec. Good luck.

The reason for the falling SSB’s yield was due to the Federal Reserve changing their interest rate outlook. The market is expecting more than three cuts to the Fed fund in 2024. In my opinion, the market might have overreacted. As a market pundit, I am estimating the Fed fund to come in around 4.75% at the end of 2024 which is two 2nd half cuts. 

The recent attack by the Houthi on commercial ships passing the Red Sea shipping lane prompted MSC, Maersk and CMA CGN, the three largest container shipping companies, to stop using the Red Sea route. That had an immediate impact on shipping rates. Some experts predicted shipping rates from Asia to Europe to jump as high as 40% as shippers bypassed the Suez Canal using the inefficient Cape of Good Hope route. Delays are estimated to be up to 10 days. Even those shipping companies who dare venture the dangerous sea, will be slap with higher insurance premiums. Oil tankers and other ships are looking to re route from the Red Sea. This new development is inflationary. If the bypass of the Red Sea drags on, lower inflation might be difficult to achieve. The extra voyage increases freight costs, which will almost certainly increase the costs of what consumers buy and consume. The extra distance increases demand for bunker fuel, ultimately pushing up the price of crude. The timeline to the end of Hamas-Israel war will determine how the Fed move on interest rate. Egypt’s economy, which depends heavily on the Suez Canal’s transit revenues will be negatively affected. Egypt and Israel tension will be further complicated by the loss of revenue from The Suez.

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