Investors still eyeing SSBs, T-bills and fixed deposits as rates yet to fall

Inflation is slowing, increasing the likelihood of the United States Federal Reserve pausing interest rate hikes. This means investors will be keeping an eye on Singapore Savings Bonds (SSBs), Treasury bills (T-bills) or fixed deposits as they may still be attractive.

If rates do fall, this will reduce borrowing expenses and help the bottom line with cost-effective refinancing for real estate investment trusts (Reits), which often rely on debt for acquisitions. Reits may be favoured over alternative income-generating assets, potentially driving up trusts’ unit prices and exposing investors to risks of the real estate sector.

However, by incorporating Reits within a comprehensive index portfolio, investors can gain the advantages of diversification across various asset classes and sectors. Changes in US central bank rates affects yields of Singapore Government Securities, which influences SSBs and T-bills, as well as fixed deposit rates.

Reits can provide relatively higher yields but come with higher risk due to market volatility. Investors need to do more research when considering different Reits as they come from different sectors, leverage levels and geographical areas.

Mr. Chia notes that Singapore Savings Bonds (SSBs) are low-risk, government-backed investments with moderate yields suitable for conservative investors or those seeking stability in their portfolios. Fixed deposits also offer fixed, predictable returns and are appropriate for risk-averse investors looking for capital preservation.

In addition, T-bills are very low risk and provide liquidity over six and 12 months, with a rate slightly higher than for fixed deposits. Ultimately, deciding on whether to invest in Reits, SSBs, fixed deposits, and T-bills depends on an investor’s financial goals, risk tolerance and time horizon.