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QuestionsCategory: Valuation QuadrantValuation Quadrant – DCF
Wilfred Yang asked 2 years ago

In the section on DCF, you mentioned that the risk free rate is the 10-year U.S treasury bond rate, and that rate has a long-term average yield of 6.51%. I like to check where you got this information from?
I had downloaded the treasury yield rates from the US Department of Treasury ( and computed the average of the 10-year yields and did not arrive at 6.51%. The averages I got were:
From 1990 – 2020: 4.43%
From 2000 – 2020: 3.35%
From 2010 – 2020: 2.31%
Another question is since our investments are denominated in SGD, why do not use the SGS 10-year bond yield?

Jieren Zheng replied 2 years ago

If I was using SG equities, I would use 10 year SGS. Same applies for each country’s 10 year sovereign bonds for their equities.

Victor Chng replied 2 years ago

Thanks JR

1 Answers
Victor Chng answered 2 years ago

Hi Wilfred, 
1.The 10 years US treasury yield is based on the long term average but due to the recent years of low interest rate the 10 years treasury average had fallen. You can see the long term chart in this article, it is the second image which use to be very high before 1990.
2. Yes you can use the SGS rates but only for SG equities as mentioned by JR

Wilfred Yang replied 2 years ago

Thanks Jieren ,Victor. I gather there is no issue if I just took the average of the 10-year bond yields over a 10 year time-frame.

Victor Chng replied 2 years ago

Welcome :)