Should You Lock in the 10-Year US Treasury Note at 5%?

The 10-year US Treasury Note yield is crossing above 5%.

With the average 10-year return of the latest Singapore Saving Bonds (SSB) at 2.45%, locking in a guaranteed USD return backed by the US government sounds remarkably enticing, even after factoring in foreign exchange risk.

Unless the US dollar depreciates drastically against the Singapore dollar over the next decade, these 10-year notes appear set to outperform local SSBs.

However, before jumping in, here are three considerations to keep in mind.

The 10-Year Lock-In and Capital Loss Risk

That 5%+ yield comes with a strict condition: it assumes you hold the asset for a full decade.

While you can liquidate your position early on the secondary market, unlike SSBs (where your principal is fully guaranteed by MAS upon monthly redemption), US Treasuries are subject to prevailing market prices:

• If interest rates rise further: Bond prices fall, and selling early will result in a capital loss.
• If interest rates drop: Your bond’s higher fixed payout becomes more valuable to the market, meaning selling early will likely yield a capital gain.

To avoid dealing with secondary market price volatility, you must be prepared to hold the note all the way to maturity.

This brings up the next logical question: since you are comfortable locking capital away for ten years, are there better alternatives?

The Attractive Option: Topping Up CPF-SA or CPF-RA

If you have not reached your prevailing ceiling limits, topping up your CPF Special Account (SA) or Retirement Account (RA)—depending on your age—remains an attractive alternative to US Treasury Notes.

While the guaranteed 4% p.a. CPF floor rate is nominally lower than 5%, it carries key structural advantages:

• Zero foreign exchange risk.
• Returns compound automatically, eliminating the hassle of manually managing and reinvesting cash coupon payouts.

The main trade-off, of course, is liquidity. CPF top-ups are strictly irreversible. These top-ups are committed to boosting your future CPF LIFE monthly payouts and cannot be withdrawn for other purposes.

On the other hand, US Treasuries offer flexibility: they can still be liquidated on the secondary market should an unforeseen emergency arise.

Long-Term Opportunity: Equities Still Win

There is no doubt that equities are more volatile than Treasury Notes. However, over a 10-year horizon, broad-based global equity index funds have historically delivered annualised long-term total returns of 8% to 10%.

While Treasury Notes can complement an equity portfolio by generating predictable cash flow, they shouldn’t be treated as a substitute for long-term capital compounding.

Mathematically, a $10,000 investment in a 5% yield 10-year Treasury Note will generate $5,000 in simple interest over the decade.

By contrast, a 10% compounded return over the same period grows that initial $10,000 capital to nearly $26,000—more than three times the total return from the note!

Local Access to Global Growth

The good news is that with SGX’s launch of the four new Xtrackers UCITS ETFs, Singaporean investors can now access broad global equity indexes locally!

For a deeper dive into these new funds, do check out The Joyful Investor’s YouTube video at the end of this post. It clearly breaks down what these UCITS ETFs offer and explores how they can complement an existing portfolio.

And if you plan to invest in them, platforms like FSM Global offer a compelling option—their flat processing fee of just S$3.80 makes larger lump-sum trades highly cost-effective.

Furthermore, once their 0% RSP processing fee applies to these new listings, you can enjoy friction-free monthly dollar-cost averaging using Cash or SRS!

It’s Never Binary

You don’t need to make an all-or-nothing choice.

A 5%+ US Treasury yield presents an enticing opportunity to de-risk a specific portion of your portfolio, lock in dependable cash flows, or smooth out equity volatility.

However, given currency risk and the historical compounding power of global equities, it makes sense to maintain a senssible allocation rather than completely liquidating your growth engines for fixed income.

My Personal Take

As for me, I’m passing on both the Treasury Notes and the newly launched SGX UCITS ETFs for now.

While I appreciate having more local options, neither addition meaningfully alters my current portfolio strategy, which remains set for the next two years.

However, I will certainly revisit them during my next major review a few years down the road, once my CPF-OA funds become accessible.

Check out The Joyful Investors‘ full analysis of the new SGX-listed UCITS ETFs below: