Still, the Year of the Rabbit got off to a good start on Jan 25, with the STI breaking above a five-times tested resistance at 3,306, indicating an upside of around 3,600. Technically, breakouts are usually followed by retreats, and this is what has happened with the STI. The current retreat should find support at the breakout level.
Unlike the US markets, the Straits Times Index (STI) may struggle in early February as its largest stocks, the banks, come to terms with a less hawkish Federal Reserve. Our yield on 10-year Singapore Government Securities (SGS) — often viewed as our risk-free rate — has been somewhat volatile, moving to as low as 2.79% as at Jan 26 before rebounding to 2.97% as at Jan 31.
The 10-year SGS yield stood at 2.94% as at Feb 1 versus the two-year SGS yield at 3.1%. The yield curve has been inverted since September 2022, when the yield on two-year SGS rose above the 10-year SGS. If the yield curve turns around for Singapore and the US, both economies may sidestep a recession. On the other hand, a slowdown in economic growth appears inevitable if inflation continues to fall.
