The anticipated September cut has led to a decline in risk-free rates. The 10-year US Treasury bond yield and the 10-year Singapore Government Securities yield are already in a developing downtrend. Those who regularly subscribe to the six-month and one-year Singapore T-bills will have noticed that yields are falling, albeit above 3%. The 10-year SGS yield is at 2.968%.
As REITs started reporting their 1H2024 results, a couple of factors stood out. One was that the average cost of debt remains stable instead of rising. The other is the reopening of the perpetual securities or perps market. These factors became evident before the New York Federal Reserve on July 29 released its multivariate core trend (MCT) model, which fell to 2.06%. The MCT model is essential for inflation watchers like Fed governors as it measures the persistence of inflation in the 17 core sectors of the personal consumption expenditures (PCE) price index. It was released on the Monday following the release of PCE price index data, which was July 26 for the month of June.
When the MCT figure was announced, Nobel laureate Paul Krugman tweeted on X: “The eagle has soft landed. The New York Fed’s measure of underlying inflation is just 2.06%. The Fed should cut rates now, now, now.” The Fed’s target inflation rate is 2% a year. As expected, the Federal Open Market Committee did not announce any cuts on July 31 but is widely expected to announce a cut in the Federal Funds Rate (FFR) in September.
