SINGAPORE – Investors have often been told to diversify their portfolios and add bonds to their baskets of stocks.
When you buy a bond, you are essentially lending money to the issuers, either governments or companies, for a fixed period of time. In exchange, you are paid a regular stream of income, or coupon, and on maturity, the bonds are redeemed and you are paid back the face value or par value. The half a percentage point cut was larger than expected. The move came after the Fed noted progress in its fight against rapid inflation, which meant the high interest rates it had adhered to were no longer necessary. The market is now forecasting two more quarter-point rate cuts in 2024.
In this environment, bonds can be a more alluring option due to lower reinvestment risks and potentially higher total returns, Mr Wong said. Conversely, when interest rates decline, existing bonds with higher yields become more attractive, pushing their prices up. Singapore retail investors can choose from various bonds, including government bonds, such as Singapore Government Securities and Singapore Savings Bonds; domestic corporate bonds; and bonds issued by companies domiciled in other countries and denominated in foreign currencies.