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Thread: How long the low interest rate environment will remain?

  1. #1
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    Default How long the low interest rate environment will remain?

    Low interest rate is another drive for the property market. How long would you think the low interest rate environment will reamin? The market seems to forecast a very long period. USD 5-year is yeilding at 1.46%. In other words, it will remain low for at least 5 years. For Japan it was almost 20 years.
    The marekt is also talking about QE2 (printing money to buy Tresaury, so the rates will remain low). Fed is also hoping to have a higher inflation.
    With USD weaking, the funny things is those money will actually come to Asia.
    You can see Singapore government is puting billions of IPO to absorb those money. Singapore Airlines is issuing bond at a 2.15% yield. Amazingly "low".
    Can we expect a low interest rate environment for another 10 - 20 years?

    Thanks,
    Richard

  2. #2
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    This is a very good and relevant question.

    Not sure - but I reckon will last for 1-2 more years unless food/energy inflation comes in too high. But over the longer terms eg 4 -5 years I expect rates to normalise to a higher band. But who really knows!

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    Difference between SIBOR and SOR

    Quoting from the SIBOR wikipedia entry,
    SIBOR stands for Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore wholesale money market (or interbank market).
    On the other hand,
    The Swap Offer Rate (SOR) represents the effective cost of borrowing SGD synthetically through borrowing USD for 3 months and swap out the USD in return for SGD for the same maturity.
    Source: http://www.yenkai.net/content/differ...-sibor-and-sor


    I am a non financial person. My question, which rate one will go up first when interest rate up? Why?

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    Quote Originally Posted by rattydrama
    Difference between SIBOR and SOR

    Quoting from the SIBOR wikipedia entry,
    SIBOR stands for Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore wholesale money market (or interbank market).
    On the other hand,
    The Swap Offer Rate (SOR) represents the effective cost of borrowing SGD synthetically through borrowing USD for 3 months and swap out the USD in return for SGD for the same maturity.
    Source: http://www.yenkai.net/content/differ...-sibor-and-sor


    I am a non financial person. My question, which rate one will go up first when interest rate up? Why?
    I am not financial either. So my answer will make you disappointed: they will go in tamdem. I guess you are more interested in knowing why.

    Just look at how banks work: they lend you long (30 years) and borrow short (1 month or 3 months). Where do they get the money from? Two sources: local and overseas.

    When they get money from local, SIBOR is the rate. They will either borrow from other banks (if they think SIBOR is low) or lend to other banks (if they think SIBOR is high). Everyday 11:30AM, there is SIBOR fixing. Something like the stock market opening. Banks will be able to reach a price (in this case SIBOR rate for different tenor: 1M, 3M, etc).

    They can also source the money from overseas, that is to borrow USD and convert it into SGD. That is SOR. The current low interest rate is driven by USD low rate, so SOR could be slightly lower than SIBOR in the short run. But the global market is efficient, so in the long run, they move in tamdem. (Otherwise, some professional will trade on the differences.)

    SIBOR is more a local event, so it tends to be more stable. SOR involves USD (altough you don't see the USD), so it might fluctuate more.
    That's also why 3m might be better than 1m because it fluctuates less.

    http://www.smartloans.sg/pages/the-c...-and-sor-rates

    http://smp-consulting.com.sg/smpc/?o...=article&id=62


    The most important thing is to find a decent bank, so no hidden agenda. By the way, if you want to save cost, use the bank's lawyer to act as your buying lawyer as well. Again, decent bank will recommend you professional lawyers.

    Thanks,
    Richard

  5. #5
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    Quote Originally Posted by richwang
    Low interest rate is another drive for the property market. How long would you think the low interest rate environment will reamin? The market seems to forecast a very long period. USD 5-year is yeilding at 1.46%. In other words, it will remain low for at least 5 years. For Japan it was almost 20 years.
    The marekt is also talking about QE2 (printing money to buy Tresaury, so the rates will remain low). Fed is also hoping to have a higher inflation.
    With USD weaking, the funny things is those money will actually come to Asia.
    You can see Singapore government is puting billions of IPO to absorb those money. Singapore Airlines is issuing bond at a 2.15% yield. Amazingly "low".
    Can we expect a low interest rate environment for another 10 - 20 years?

    Thanks,
    Richard
    Good points albeit in poor English.

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    Quote Originally Posted by Localite
    Good points albeit in poor English.
    Don't be mean lah

  7. #7
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    Default Poor English

    Quote Originally Posted by Localite
    Good points albeit in poor English.
    Thanks for the comments. English is my 2nd launguage. I was declined a global manager's role due to poor English. I've spent a few thousand with British Council, still no much hope - in particular for my spelling.

    Thinking of introducing "spelling bee" to Singapore. Any sponsors?

    Thanks,
    Richard
    PS. Would you mind to rephase it in good English?

  8. #8
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    Quote Originally Posted by richwang
    Thanks for the comments. English is my 2nd launguage. I was declined a global manager's role due to poor English. I've spent a few thousand with British Council, still no much hope - in particular for my spelling.

    Thinking of introducing "spelling bee" to Singapore. Any sponsors?

    Thanks,
    Richard
    PS. Would you mind to rephase it in good English?
    Cool... A smart move.

  9. #9
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    Quote Originally Posted by richwang
    Thanks for the comments. English is my 2nd launguage. I was declined a global manager's role due to poor English. I've spent a few thousand with British Council, still no much hope - in particular for my spelling.

    Thinking of introducing "spelling bee" to Singapore. Any sponsors?

    Thanks,
    Richard
    PS. Would you mind to rephase it in good English?
    Richard,dont be disheartened,I also have problems with my English as Chinese is my 1st language.However,the key to success in any investment(particularly property),language only constitutes to being a mode of communication,wisdom still plays a pivotal role in ensuring success.As i am a "chinese helicopter",i have invested in propety for over a decade.It was wisdom and precise analytical skill which allowed me to own 10 propety,including condos and shop spaces.Please continue posting any ideas pn propety investment that is beneficial to all the netizens here.Cheers and Good Luck to your propety investmend odyssey.

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    As you can see my English is no good either. I blame that I was in Chinese Primary School with Chinese at first language. My whole family speaks hokkian. My parents are not educated and we are too poor to engage tuition teacher. Worst I was a slow leaner during my school days. I worked very hard but was not able to score well for my English.

    Able to write proper English is important in Singapore. So we shall write more to irritate our fellow forummers and improve ourselves along the way.






  11. #11
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    my engrish is the most worstest tok kong speaking here. hope everybodies can good correcting my english. many thank yuo hor in advancing ant wishing one and all a goods day ahead. geylang environment good for piak piak, notch good for learnings english.

  12. #12
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    Quote Originally Posted by Geylang OKT
    my engrish is the most worstest tok kong speaking here. hope everybodies can good correcting my english. many thank yuo hor in advancing ant wishing one and all a goods day ahead. geylang environment good for piak piak, notch good for learnings english.
    funny man E8 score for you!!

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    Quote Originally Posted by rattydrama
    As you can see my English is no good either. I blame that I was in Chinese Primary School with Chinese at first language. My whole family speaks hokkian. My parents are not educated and we are too poor to engage tuition teacher. Worst I was a slow leaner during my school days. I worked very hard but was not able to score well for my English.

    Able to write proper English is important in Singapore. So we shall write more to irritate our fellow forummers and improve ourselves along the way.






    i am not any better .. very often errors after i post

    i m english ed, but my ENTIRE family was chinese ed ... no one could help me when i was schooling ...

    but hor ... you will be surprised .. alot of ang moh here in NY think i am ABC ... american born chinese ...

    when i told them i am born and bred in spore ...they were amazed ..

    so .. we are all not that bad lah

  14. #14
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    Quote Originally Posted by rattydrama
    funny man E8 score for you!!
    wahahaha... lucky not F9

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    Default Debt / Equity Ratio

    Quote Originally Posted by paul phua
    Richard,dont be disheartened,I also have problems with my English as Chinese is my 1st language.However,the key to success in any investment(particularly property),language only constitutes to being a mode of communication,wisdom still plays a pivotal role in ensuring success.As i am a "chinese helicopter",i have invested in propety for over a decade.It was wisdom and precise analytical skill which allowed me to own 10 propety,including condos and shop spaces.Please continue posting any ideas pn propety investment that is beneficial to all the netizens here.Cheers and Good Luck to your propety investmend odyssey.
    Thanks for all the support. I have encouraged my son to study English Literature - a subject not easy to get A. His English is much better than mine. But Chinese is now his worst subject.

    Wow! 10 properties in 10 years! Have you fully paid them up? If not, have you done some what if analysis? My friend used to won a property in Orchard Road in 1994. The rental went up from S$3k to S$4.8K, and then dropped to S$1.5K during Asia financial crisis. He then sold it.

    Thanks,
    Richard

  16. #16
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    Default Give me the solutions, not problems.

    Quote Originally Posted by Localite
    Good points albeit in poor English.
    Localite,
    I've got my Indian friend to edit for me. Does it sound better now? Could you further edit it?

    Thanks,
    Richard

    How long the low interest rate environment will remain?
    =========================================

    Low interest rate is another boon for the property market. How long do you think the low interest rate environment will remain? The market seems to forecast low interest rates for the foreseeable future. USD 5-year is yielding at 1.46%. In other words, it will remain low for at least 5 years. For Japan it was almost 20 years.
    The market is also talking about QE2 (printing money to buy Treasury, so the rates will remain low). Fed is also hoping to have a higher inflation.
    With USD weakening, it is more likely that this money will actually come to Asia.
    You can see Singapore government is putting billion dollars in IPO to absorb this money. Singapore Airlines is issuing bonds at a 2.15% yield. Amazingly "low"!
    Can we expect a low interest rate environment for another 10 - 20 years?

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    What does QE2 stand for?

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    Think its referring to the British Pounds.

    Quote Originally Posted by valkri
    What does QE2 stand for?
    BE CENTRED BY ALL AT THE FRINGE OF THE CITY @

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    Quote Originally Posted by valkri
    What does QE2 stand for?
    QE: Quantitative Easing a type of monetary policy

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    Last year it was predicted was ard 3Q 2010, couple months back it was ard 3Q 2011/or early 1Q 12, now with QE 2 coming who knows?

    AS long as the US economy takes 3 steps forward and 2.5 steps back, we shd be able to enjoy the low interest rate for some time more.

    Quote Originally Posted by JuzMe
    QE: Quantitative Easing a type of monetary policy

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    Quote Originally Posted by valkri
    What does QE2 stand for?
    QE2 is quantitative easing round 2. it is also known as the Ben Bernanke maneuver.

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    frankly, I believe interest rates in the US will hover around zero for many many years to come. same thing for Singapore.

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    in my opinion, rates will stay low in the near term. QE2 will flood the market with cheap USD and US treasury rates and interbank swap rates stay close to zilch.

    if local rates increase and become more attractive comparatively, it will attract money inflow from global -> viola, asset price inflation! this is a little simplistic, hope it suffices

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    Quote Originally Posted by eng81157
    in my opinion, rates will stay low in the near term. QE2 will flood the market with cheap USD and US treasury rates and interbank swap rates stay close to zilch.

    if local rates increase and become more attractive comparatively, it will attract money inflow from global -> viola, asset price inflation! this is a little simplistic, hope it suffices
    same here...i actually wish MAS to tighten liquidity by increasing the interest rate

    metals booming now...silver almost 25!!! any silver guru here?

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    my golden agri just zoomed up 10% in two days.

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    Quote Originally Posted by stalingrad
    my golden agri just zoomed up 10% in two days.
    keep moving .

  27. #27
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    Quote Originally Posted by devilplate
    same here...i actually wish MAS to tighten liquidity by increasing the interest rate

    metals booming now...silver almost 25!!! any silver guru here?
    just remember to diversify your risk and spread it across your invested asset classes, rather than plunge wholeheartedly into metals and commodities.

    all you need is for china to come out saying that lots of their municipal bonds are at the risk of default and bam! commodities will be amongst the hardest hit

  28. #28
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    Thank you, I learnt something.

    So QE round #1 was in 2008 and now we are expecting another round so soon after? Would that mean we should buy into gold even at its high current price?

    Quote Originally Posted by JuzMe
    QE: Quantitative Easing a type of monetary policy

  29. #29
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    Quote Originally Posted by rattydrama
    Difference between SIBOR and SOR

    Quoting from the SIBOR wikipedia entry,
    SIBOR stands for Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore wholesale money market (or interbank market).
    On the other hand,
    The Swap Offer Rate (SOR) represents the effective cost of borrowing SGD synthetically through borrowing USD for 3 months and swap out the USD in return for SGD for the same maturity.
    Source: http://www.yenkai.net/content/differ...-sibor-and-sor


    I am a non financial person. My question, which rate one will go up first when interest rate up? Why?
    SOR is more volatile than SIBOR in crisis as SOR invloves USD. In comparison, I would say SOR is less interest rate sensitive than SIBOR and more 'market sensitive'.

  30. #30
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    Default Inflation

    The 5 year Inflation linked US fixed income instrument is trading at high price, meaning the market is expecting the inflation will eventually come very high. When employment rate improves, Fed will raise the rate. I've just talk to a guest from Boston, he says the risk is it can be earlier than most people have expected - as early as 2nd half of next year.
    Let's keep an eye on it.

    Thanks,
    Richard

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