Short Take: Bonds, Yen And Interest Rates

Introducing a new series called Short Take, where I try to explain complex goings-on in the financial markets and economy in digestible bits, and tie them back to the Bedokian Portfolio investment philosophy and methodology where relevant.

Kicking off the series: a concise look at recent rising yields and the Japanese yen.

Picture generated by Nano Banana and Chat GPT

Global bond markets and currency values are undergoing significant shifts. The United States (U.S.) Treasury yields remain near multi-year highs due to economic strength, government borrowing, and sticky inflation, while Japan’s 10-year bond yield recently breached 3%, a level unseen since 1996. Meanwhile, the U.S. Federal Reserve (Fed) policy rate stands at 3.50–3.75%.

These moving parts are interconnected and ripple through global portfolios in the following ways:

The Yen Carry Trade

For years, investors borrowed cheap yen at low interest rates to invest in higher-yielding U.S. assets. If the rate gap narrows, either via Fed cuts or Bank of Japan tightening, investors may unwind positions and buy back yen. That could contribute to volatility similar in nature to what was seen in August 2024.

Broader Market Impact

Rising U.S. yields increase corporate and real estate borrowing costs while making fixed income more attractive relative to equities. Higher Japanese yields may encourage domestic investors to repatriate capital from foreign markets.

Singapore Portfolio Implications

Local investors feel this through elevated borrowing costs for Singapore real estate investment trusts, higher domestic bond yields, and currency fluctuations that alter the Singapore-dollar value of foreign holdings.

The Bedokian’s Short Take

Macroeconomic factors form the economic conditions layer of fundamental analysis in The Bedokian Portfolio¹. Rates drive bond yields, rate differentials drive currencies, and currency movements drive capital flows across global markets.

However, analysing macro conditions is about understanding risk transmission, not forecasting market directions. The most one can do is guesstimate. No one can consistently predict central bank moves or currency movements. The goal is to build a resilient, diversified portfolio across distinct asset classes that can withstand economic uncertainty, rather than reacting to short-term market noise.

Related post

The Economic Machine Analogy, Dimension And Degree

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Disclaimer

1 – The Bedokian Portfolio (2^nd Ed), p91-93

The Equity Baggers

Coined by legendary fund manager Peter Lynch in his 1989 book One Up on Wall Street, "bagger" is a term borrowed from baseball, where the number of bases reached by a runner measures the success of a play. Applied to investing, it describes share counters that have increased by a multiple of the original buy price. Thus, a two-bagger means the price has doubled, while a five-bagger indicates an increase of five times the purchase price.

 

 

Picture generated by ChatGPT

For this post, I will share three counters in our portfolios that have reached at least a two-bagger status, based on the average buy price against the current price as of market close on 28 Aug 2026. For USD counters, the average entry price is based on the current forex rate of USD/SGD 1.00/1.27. It is worth noting that the following counters were not bought in one shot, but rather across separate tranches. Hence, there were some tranches that had hit multiple baggers, while others gained less than 100%.

Here are the three counters:

Counter #1: Apple (Bedokian Portfolio)

Average entry price: USD 96.74. Current price: USD 319.70.

Apple is one of the longest continuously held counters in our Bedokian Portfolio since 2014. Apart from a partial divestment in March 2024 and some buybacks just a few weeks later, it has still achieved an overall gain of 230.47%.

In hindsight, Apple's relative lag in the artificial intelligence (AI) race paradoxically gave it a "technology counter without the AI hype" safe haven status¹. The company recently announced a refreshed Mac Mini and Mac Studio range, and the new incoming CEO, John Ternus, is likely to present new iPhones in the coming days, which may include the company's first foldable model.

Counter #2: OCBC (CPF-IS Portfolio)

Average entry price: SGD 12.11. Current price: SGD 31.07.

OCBC is one of the three local banks attributed to the strong performance of the Straits Times Index over the past couple of years. Achieving a bagger status for a local blue-chip counter (in this case, 156.56%) within a short timeframe is quite rare. Our last entry price less than a year ago in September 2025 was at SGD 16.45; now it has almost doubled this number.

The current price-to-book (P/B) ratio for OCBC is approximately 2.17, which among the three banks stands in the middle, with DBS at approximately 3.07 and UOB at approximately 1.27. In my view, the current price looks elevated on a P/B basis relative to historical norms. That said, some investors may point to the forward dividend yield of 3.03% and the bank's guided stable-to-improving income outlook for FY2026 to justify further interest in this counter.

Counter #3: ASML (Bedokian Portfolio)

Average entry price: USD 770.13. Current price: USD 1696.16.

Only four tranches were accumulated between June and September 2025, and the gains within approximately a year stand at 120.24%; a result that is, frankly, an impressive one. I had written about ASML back in June 2025 (read here).

ASML possesses what is arguably the most formidable moat in the field of lithography; it is the world's sole commercial supplier of Extreme Ultraviolet (EUV) lithography machines. This EUV monopoly, coupled with AI-driven demand expansion and a record huge order backlog (around EUR 38.8 billion), has propelled its share price to where it stands today. The main concern is that the current price may be somewhat overvalued: at a 5-year expected Price/Earnings-to-Growth (PEG) ratio of 2.07, so my view is that future price appreciation may not be as rapid as what the past year has delivered.

The Bedokian's Take

Hidden in plain sight across the three counters above are two main factors contributing to their bagger status: economic moat and the power of compounding.

Among the three, Apple and OCBC share elements of both moat and compounding, while ASML's rapid gain over the past year or so is more directly attributable to moat, specifically the market's repricing of an irreplaceable technology monopoly. Therefore, when looking for counters with bagger potential, ensure that the company has goods or services that people genuinely need, and give it the time required for its value to be reflected in the price.

Disclosure

The Bedokian is vested in the above three companies.

All figures are obtained from Yahoo Finance unless otherwise specified.

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Disclaimer

1 – Wearden, Graeme. Apple becomes second $5tn company as investors flee AI stocks. The Guardian. 28 Jul 2026. https://www.theguardian.com/technology/2026/jul/28/apple-second-ever-5tn-company-as-investors-flee-ai-stocks  (accessed 27 Aug 2026)

Honing That Strategic Thinking

During my secondary school and tertiary education years, I had the joyful experience of playing several strategic games, such as chess, Risk, BattleTech, and a few others that not many people had heard of (Fortress America, anyone?). The friend who introduced me to these games mentioned that one day, the lessons learnt from playing them would come in useful.

 

Picture generated by Perplexity

His advice came through.

Strategic thinking is important because it gives a clearer idea of where one wants to go, and from there, what needs to be done to get there. Granted, unlike what one may have seen in shows and stories where the villains’ plans fall perfectly into place, in real life, the said tasks and paths may not be that smooth sailing at all. Also, the longer the time taken and the more variables involved in achieving the objective, the higher the tendency of obstacles hindering along the way.

However, that does not mean one should give up on the finish line if the kinks appear. This is where adjustments and contingencies come into play; if Path A is blocked, adjust it by using Path A1 or fall back on the contingent Path B. Bringing in the chess analogy, one may have a set of moves to checkmate the opponent, but if the latter does something different that throws off the plan, another one needs to be formulated. This is the so-called adjustment and contingency.

The interesting thing is that this sort of strategic thinking is not confined to games. After reading the above, some may feel the tediousness of playing the long game with all the constant thinking and planning. However, there is a high chance that those who think this way are already practising strategic thinking in their daily lives; mapping out tasks for a project, planning the family vacation, etc. If things go wrong, people find ways to solve the problems because they want their aims to be met.

Personally, I opine that playing strategic games can reduce the perceived exhaustion of constant thinking, monitoring and ideating, with them becoming more of second-nature traits.

Financial planning is no different. Like a strategic game, financial planning starts with an objective, works out a route towards it, and then adjusts when circumstances change. It is a never-ending job because it encompasses the fields of investing, retirement, managing expenses, etc., which is why I stated that a good financial plan takes a lifetime.

During the journey, we will inevitably encounter circumstances that make us change plans, like in our case, bringing forward our step-down age and the closure of the CPF Special Account after age 55, to name a couple. We then carried out adaptations and workarounds to get over these changes and challenges.

This is another side effect of thinking strategically: never give up when things do not turn out as expected. Having a plan does not mean that everything will go according to it. The objective may remain the same, but the route towards it may change.

In the end, strategic thinking is not about predicting every move correctly. It is about knowing where we want to go, having a plan to get there, and being prepared to adjust that plan when circumstances dictate.

Related posts

A Good Financial Plan Takes A Lifetime

Portfolio Pivoting

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Active Or Passive? It Depends.

When talking about investing, one could often hear the terms "active investing" and "passive investing". Usually, active means selecting investments and making decisions along the way, while passive generally means buying broad market indices and leaving them alone most of the time.

 

Picture generated by ChatGPT

However, one may look a little deeper than that. Assuming asset allocation remains constant, portfolio management can be looked at from two angles:

Selection: “What do I buy?”

Management: “What do I do with what I have vested?”

Putting these two together, there would be four outcomes as detailed below.

Passive–Passive

Passive selection + passive management.

The investor buys broad-based index funds or exchange traded funds (ETFs) and largely leaves them alone. There is little security selection and little portfolio intervention. Rebalancing, if carried out, is periodic and systematic, perhaps once or twice a year. This is probably the closest to what is commonly called a "set-and-forget" portfolio.

Passive–Active

Passive selection + active management.

The investor uses passive instruments, such as ETFs, but actively manages the portfolio. For example, an ETF may be replaced, cash may be deployed, or the portfolio allocation may be adjusted when the percentages change.

Active–Passive

Active selection + passive management.

Here, the investor actively chooses individual securities but largely leaves them alone afterwards. For instance, an investor may select a group of stocks and real estate investment trusts (REITs) based on certain criteria and hold them for the long term. Rebalancing, if required, is carried out periodically according to a predetermined process.

Active–Active

Active selection + active management.

The investor actively chooses the securities and actively manages them afterwards. Holdings may be added, reduced or replaced based on changing circumstances. Rebalancing is also actively determined rather than carried out at fixed intervals.

A Mix Of Both: Core and Satellite

A portfolio does not have to consist entirely of ETFs or individual securities. The two can be combined through a Core and Satellite approach¹.

The core is the central group of financial instruments, typically index ETFs, which forms the main basis of the portfolio. The satellites are individual securities such as equities or bonds, which can be used to enhance the portfolio further.

The idea is to combine the diversification of passive instruments with some individual security selection, potentially enhancing the yield and returns of the portfolio.

For example, an investor could have an equities index ETF as the core and selected individual equities as satellites. The same approach can be used for REITs and bonds, with the ETFs providing the broader exposure while the individual securities provide the additional selection.

Core and Satellite therefore describes how the portfolio is composed, while the four active–passive combinations describe how the holdings are selected and managed.

A Core and Satellite portfolio that is periodically rebalanced according to predetermined rules could be Active–Passive, if the individual securities are actively selected but the portfolio is otherwise managed systematically. If the holdings and rebalancing are both actively reviewed and adjusted, it could instead be Active–Active.

Conclusion

The Bedokian Portfolio can be implemented through all four combinations of active and passive selection and management.

The underlying constant, however, remains the asset allocation. The choice of ETFs, individual securities, or a combination of both can vary, as are the ways the portfolio is managed and rebalanced.

Ultimately, asset allocation, diversification and rebalancing work together to balance return potential and risk.

So, active or passive? 

It depends on what one is being active or passive about.

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Disclaimer

1 – The Bedokian Portfolio (2^nd Ed), p135-137

Privatising Profits, Socialising Blame

The recent roller-coaster ride in South Korea's KOSPI has been quite something. After a strong rally earlier in the year, the market experienced a sharp reversal in July before staging an equally sharp rebound. Majority of opinions focused on elevated margin borrowing and leveraged products, which had amplified the market's movements.

Picture generated by ChatGPT

To be fair, this is not a uniquely Korean phenomenon. We have had seen similar episodes in many markets over the years. When prices rise, investors talk about conviction, opportunity and being right. When prices fall, the discussion can sometimes shift towards interest rates, institutions, short sellers or regulators, to name a “few”.

 

It reminded me of an old phrase: privatising profits, socialising blame.

 

Who owns the decision?

There is nothing wrong with having conviction in an investment, but rather the question is whether the accompanying risks are understood and accepted.

 

One of my principles often advocated is to avoid leverage. Borrowing money to invest does not make the underlying investment better. It simply increases the size of the potential outcome, both up and down.

 

When markets rise, this can make a good decision look even better. When markets fall, however, the losses can become much harder to manage.

 

Framework or speculation?

For investing, we begin with objectives, risk appetite and asset allocation before moving on to individual securities. For trading, there is a defined trading plan, including the entry, exit and acceptable risk. Neither approach inherently requires borrowing money to make the numbers look more exciting.

 

Once leverage and excessive speculation enter the picture, the process can easily be reversed. Instead of asking whether an investment or trade fits the portfolio, the investor or trader starts with a position and then finds reasons to justify it. The larger the position becomes, the greater the temptation to defend it.

 

This is not unique to any particular market or group of investors. Given the right combination of rising prices, easy credit and optimism, it can happen almost anywhere. The problem is that a speculative position does not become a sound investment simply because it has made money. When it eventually goes wrong, blaming the market does not undo the risk that was willingly taken.

 

Conclusion

The KOSPI episode will eventually become another market story. The technology, stocks and headlines will change, but the underlying behaviour will probably remain familiar.

 

For my take, one of the important disciplines in investing and trading is simply to own our decisions. If we are prepared to take credit when we make money, we should also be prepared to accept the lesson when we lose it.

 

A sound methodology cannot prevent every loss. What it can do is reduce the temptation to turn investing into speculation, and ensure that one wrong decision does not have the power to derail the entire journey.

 

The market does not owe us profits, and perhaps that is a good thing.

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The Bedokian Portfolio Turns 10!

Back in July 2016, the first post on this blog went live. It was a short piece, little more than a welcome note explaining that this would be a space for observations and opinions on the markets and the economy, alongside clarifications on The Bedokian Portfolio ebook (then the first edition) that had just been published. I was hoping that the information from the ebook and blog would be useful to whoever was reading them. At that time, there was still a relative shortage of investment books written with a Singapore context, especially in the field of portfolio management. 

Picture generated by ChatGPT

Looking back at the past 383 posts, I had commented on the general market and economic situations, analysed the various securities (vested or not), and shared on the psychological and behavioural aspects of investing. Beyond the blog itself, the past decade also saw the publication of the second edition of The Bedokian Portfolio, The Trading Portfolio Handbook, and an amateur paper testing The Bedokian Portfolio on the United States market (all available for free download here). 

Recently, three apps were developed: Equities Indicator, Growth Indicator and S-REITs Indicator (see here), and they assist in screening value and dividend equities, growth equities and Singapore real estate investment trusts (REITs), respectively, according to the selection guidelines from the The Bedokian Portfolio ebook¹. The introduction of AI-generated pictures and characters for the blog, alongside the apps, represents my experimentation with AI, which I will elaborate on further below.

In the past ten years, we had gone through a global pandemic, trade wars, periods of low and high interest rates, the ongoing de-globalisation and the current AI boom. Through all of this, the five asset classes of the Bedokian Portfolio: equities, REITs, bonds, commodities, and cash, experienced their own respective ups and downs. It is precisely the correlation between the asset classes, together with the accompanying disciplines of diversification and rebalancing, that brought about the gradual compounding growth and relatively lower volatility of the portfolio.

Where is our portfolio standing now?

I had shared earlier here that our main Bedokian Portfolio was down 4.75% year-to-date (YTD). As of local market close yesterday (29 Jul 2026, 5:00 PM), our portfolio was up around 6.8% YTD, and the total market value had surpassed 9.4% of our year end 2029 target. The latter is broadly expected, as we are benchmarking against a 4% year-on-year growth trajectory, and this conservative performance measure acts as a dampener to smooth out the percentage swings of returns.

The Use of AI

In recent years, AI has become indispensable in our digital life. A lot of apps and even the familiar online search engines have seamlessly incorporated the AI tools, in particular large language models (LLMs) and chatbots. I had also started on this trend with the abovementioned picture generation, and development of the three apps through AI assistance (a.k.a. vibe coding).

On top of this, we sometimes use AI to assist and augment our investment and trading research and analysis. The fun part about this is we could use the output of one LLM, and input its result on others, i.e. using the “LLM-as-a-judge” method, to provide additional perspectives.

AI tools are powerful in terms of collecting, aggregating and summarising data and information, and sometimes in inference. Still, my honest opinion is, for the investing and trading aspect, some manual interpretation and intervention is needed, and the ultimate judgment call should be reserved on the individual investor/trader.

Going Forward

The future is unknown, as always, and there will be events that disrupt the whole scheme of things, like complex geopolitics and AI in the current context. What is known is that this blog will continue for the foreseeable future, providing tips and commentary on the investing world.

Here is to the next chapter, and to a fruitful investing and trading journey ahead for all of us.

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Disclaimer

1 – The Bedokian Portfolio (2^nd Ed). Ch12 and Ch17.

How Liquid Should Your Liquidity Be?

Cash plays an important role in the Bedokian Portfolio, a pool of liquidity that could be deployed to the other four asset classes (equities, real estate investment trusts or REITs, bonds and commodities). Cash injections, through regular contributions from disposable income, dividends from equities, distributions from REITs, coupons from bonds and interest from cash, contribute to this pool.

What if one could get more bang for the buck from this liquid pool?

Sounds a bit contradictory as cash is meant to be readily deployable capital. Unless the cash is in physical form and locked away in a safe or a metal container of a famous powdered malt-drink, it is still earning something depending on where it is.

 

 Picture generated by ChatGPT

 

Where Else To Put Cash?

The first obvious place is the basic bank savings account, which is around 0.05% based on what I had seen from bank websites. The next bank offering would be fixed deposits that offer a higher interest rate but with locked-in periods ranging from one month to three years.

 

Besides banks, there are other means of holding cash and still earning something. Six-month and one-year Treasury Bills (T-Bills) are issued by the Monetary Authority of Singapore (MAS) and can serve a similar purpose to a fixed deposit, although they are government securities rather than bank deposits. There is another financial instrument issued through MAS, the Singapore Savings Bonds (SSBs), a 10-year savings plan with incremental interest rates over time.

 

Another mention is money market funds, or MMFs. These are unit trusts that invest in short-term debt securities such as T-Bills, short-term corporate debt and fixed deposits. Hence, they combine several cash management instruments within a single investment vehicle.

 

Not All Are Equal

Safes, bank accounts, T-Bills, SSBs and MMFs are ways to hold one’s cash in the portfolio and the latter four generate some return, albeit lower than the other asset classes. However, they are different in terms of their structures and characteristics. Bank savings accounts and fixed deposits are insured up to SGD 100,000 by the Singapore Deposit Insurance Corporation (SDIC), subject to conditions. T-Bills and SSBs are issued by MAS and backed by the Singapore Government. MMFs are investment vehicles, so they are subject to market forces and are not guaranteed in the event of a collapse, though the latter happening is very remote.

 

My take is that the more important aspect of cash is not about how much yield I can earn, but rather the liquidity of the various mentioned instruments. For me, liquidity matters more than squeezing out every last iota of return.

 

Monies from bank savings accounts can be withdrawn anytime. MMFs can generally be redeemed within a day or two. SSBs are redeemed monthly, while T-Bills and fixed deposits will have to wait till the end of the tenure, provided the former are not sold in the secondary market, and the latter are not closed prematurely. Looking across these cash management instruments, there is generally a trade-off between yield and liquidity.

 

Any Compromise On This?

Choosing a place to hold cash for the portfolio is like considering the "liquidity of the liquidity". My take is, as a ballpark, a holding period of no more than six months is preferred; this is the time frame where a typical passive investor would rebalance his or her portfolio, so a six-month T-Bill or fixed deposit would allow the funds to become available again for deployment. Also, other recent streams of cash received from the portfolio could be utilised first, and this may lead to a probable sub-division of cash into liquid (bank savings accounts and MMFs) and slightly less liquid places (T-Bills, SSBs and fixed deposits), or maybe even in safes and tin cans (though a trip to the automated teller deposit machines is needed for this).

 

Final Take

There is a tendency for investors to judge every asset class by its returns. Equities are expected to grow. REITs are expected to generate distributions. Bonds are expected to provide stability. It is only natural, then, to expect the cash component to chase the highest interest rates available.

 

But perhaps that is asking it to do something it was never meant to do.

 

One lesson I have learnt over the years is that every asset class should have a clearly defined purpose within a portfolio. Problems often arise when we expect one asset class to behave like another.

 

In the Bedokian Portfolio, the role of cash is simple. It is not there to outperform the other asset classes. It is there to provide a readily deployable pool of liquidity whenever investment opportunities arise. If it can earn a modest return while waiting, that is certainly welcome. But if chasing a slightly higher yield means sacrificing that flexibility, then perhaps the extra return is not worth the compromise after all.

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Disclaimer

References

https://www.mas.gov.sg/bonds-and-bills

https://www.investopedia.com/terms/m/money-marketfund.asp

https://www.sdic.org.sg