More than the comments, the bond market pushed back on the Trumpian tariffs. The Trump administration can ignore the pundits, but not the bond markets.
“Long dated 10-year, 20-year and 30-year US government bond yields have rose by 50bp, 50bp and 47bp respectively last week to 4.49%, 4.93%, and 4.87%. The higher government bond yield reflected foreign investors’ disappointment over uncertainties surrounding the Trump Administration’s flip-flopping trade policy,” observes Jonathan Koh, an analyst at UOB Kay Hian.
Last week, Koh had recommended a sell on DBS Group Holdings and a hold on Oversea-Chinese Banking Corporation. On April 14, he upgraded DBS to a hold, and OCBC to a buy, .
Koh adds that John Williams, President of NY Fed, forecast inflation would rise to 3.5-4.0% in 2025 due to tariffs imposed by the Trump Administration. He expects GDP growth to slow considerably to below 1.0%, while unemployment would reach 4.5-5.0%. He views the current modestly restrictive stance of monetary policy to be appropriate. Neel Kashkari and Alberto Musalem have also signalled their intention to keep rates on hold.
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Koh maintains that the banks’ ability to pay generous dividend could be under threat. While he expects DBS to maintain its 60 cents per quarter dividend, he says “we might have to revise our DPS forecast lower if downward pressure on economic growth intensifies going forward”.
“We expect OCBC's DPS to be stable at 100 cents in 2025 (unchanged, regular dividend: 84 cents, special dividend: 16 cents). We might have to revise our DPS forecast lower if downward pressure on economic growth intensifies going forward,” Koh adds.
