Someone pointed out that the interest rate for Singapore Government bonds has increased in recent days, and is now above 3% for longer term bonds.
When interest rate increases, the prices of the bond drops. An increase of 1% in the yield can cause a drop of more than 10% in the price of the longer term bonds.
During the past 15 years, Singapore went through a period of low inflation and low interest rate. As inflation has increased this year, and may continue at a high level in the future, there is the likelihood that interest rate will increase.
If you are invested in a long term Government bond or life insurance policy with a guaratneed return, you may be locked into the low return for many years.
Try to invest for the shorter term, say up to 3 years, or into equities and REITS, which are likely to give some hedge against inflation.
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