The past week saw the drop in price of Singapore Government bonds. What is the reason for the drop and is this the right time to buy the 10 or 15 year bonds, considering that their yield is well over 3%? Are they not better than some of the single premium products offer by insurance companies?
I do not follow the market in Government Bonds. I suspect that the drop in price is due to a general rise in interest rate. The world may be entering a period of higher inflation, which is being reflected in the increase in interest rate.
If the level of interest rate increases further, you may see a further drop in the bond prices. I do not know if this is the right time to buy Government bonds, as it depends on whether interest rate will rise further.
Perhaps, if you buy a bond for 3 to 5 years, it may be all right. However, the yield may be lower than 3%.
Here are the yields on Singapore Government bonds, taken from the Fundsupermart website:
Maturing Remaining Yield
2011 3.1 yr 1.79%
2013 5.1 yr 2.51%
2018 10.2 yr 3.38%
2022 14.2 yr 3.39%
2027 18.7 yr 3.80%