This is a practical guide to long-term rates, interpreting US and Singapore yield trends, and understanding their influence on markets and borrowing costs.
What is the long-term interest rate: explaining trends in US and Singapore yields
A long-term interest rate is the rate applied when money is borrowed or loaned for more than one year.
In investment practice, it generally refers to the prevailing yield on a newly issued 10-year government bond.
This article explains long-term interest rates, how they are set, their economic effects, and answers some frequently asked questions.
Comparison with short-term interest rates
Short-term interest rates apply to borrowing or lending periods of up to one year.
Singapore’s central bank, the Monetary Authority of Singapore (MAS), does not set an official policy rate; instead, it conducts monetary policy through an exchange-rate band.
Consequently, short-term rates are largely market-driven and tracked via indicators such as SORA (Singapore Overnight Rate Average).
Long-term rates, by contrast, are shaped chiefly by supply and demand in the government bond market.
How long-term interest rates are determined
The level of a long-term interest rate is pegged to the market price of long-term government bonds.
Key drivers of the nominal rate include:
- Real economic growth
- Inflation expectations
- A credit risk premium linked to government debt sustainability
Stronger economic growth typically boosts funding demand and pushes rates higher,
Diminished confidence in public finances can also prompt investors to demand a higher yield to compensate for the increased risk of default, similarly resulting in higher rates.
Economic impact of long-term interest rates
Impact on equity markets
Rising interest rates are usually viewed as negative for share prices, while falling rates are seen as positive.
Bond yields offer a stable return, whereas equities carry greater price risk.
However, during periods of strong growth, both rates and equity prices may rise.
Impact on mortgages and corporate finance
Singapore mortgages are available in ”SORA-pegged” and ”fixed-package” formats.
The former is sensitive to short-term rates, while the latter may be priced off long-term benchmarks.
Accordingly, an increase in long-term rates tends to lift fixed mortgage rates.
Corporate finance is likewise often priced with reference to a long-term benchmark, for example ”SORA plus a spread”.
US 10-year Treasury chart
Source: TradingView
The monthly chart above illustrates US 10-year Treasury yields from 1998 onwards.
Yields trended lower until 2020, then began to rise before moving into a more range-bound pattern.
OANDA bond CFDs live charts
OANDA provides live charts tracking bond prices rather than yields.
Select any instrument name from the ”Instrument” column to view its live chart.
US 10 Year Treasury Bond Note CFDs
Singapore Government Securities long-term yield trend
This monthly chart tracks 10-year Singapore Government Security (SGS) yields since 2000.
The decline up to 2020 was followed by a rise that mirrors the pattern in the US Treasury yield.
Frequently asked questions
Higher long-term rates increase mortgage and borrowing costs, potentially straining household budgets and corporate cash flow.
Long-term bond yield charts are available on TradingView.
OANDA offers live charts of bond CFDs prices.
Market forces primarily set both, although short-term rates such as SORA respond to MAS’ exchange-rate policy framework.
Long-term rates are determined by supply and demand in the SGS market.
Summary
A long-term interest rate applies to borrowing or lending periods exceeding one year and is typically proxied by the yield on a newly issued 10-year government bond.
Changes in long-term rates influence the equity markets, as well as, the cost of mortgages and corporate finance.
An analysis of historical trends can help investors anticipate future interest rate movements.
OANDA offers beginner-friendly content explaining key investment terms.
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