Singapore’s bonds set to gain on tighter supply, more liquidity
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Investors are increasingly hunting for alternatives to US assets as havens, and Singapore bonds’ standout performance in 2025 adds to the allure of their AAA rating.
ST PHOTO: LIM YAOHUI
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SINGAPORE – Singapore’s government bonds may see elevated demand until the end of 2025, according to Barclays.
Yields on the island nation’s 10-year sovereign debt have fallen by around 100 basis points in 2025, the largest decline in emerging Asia. Lower net bond supply towards the year end, favourable seasonality and improving cash levels may help the trend continue.
“We see a reduced or even negative net government bond supply into the year end,” Singapore-based Barclays strategist Audrey Ong said. That will support liquidity and increase demand for the securities, she added.
Barclays projects the 10-year yield will decline to 1.6 per cent by Dec 31 from the current 1.85 per cent.
Investors are increasingly hunting for alternatives to US assets as havens, and Singapore bonds’ standout performance in 2025 adds to the allure of their AAA rating. Liquidity will also be boosted as the Monetary Authority of Singapore (MAS) is set to offer the lowest net supply of T-bills on an annual basis since 2019, with around $23 billion issued in 2025 so far.
Singapore’s loan-to-deposit ratio stood at 65.5 per cent in September, according to MAS, near the lowest level in data going back to 2021. This has also boosted onshore liquidity, resulting in the cost of borrowing in the interbank market remaining near its lowest levels since June 2022.
Seasonality also supports bond bulls. Singapore 10-year yields tend to decline in November – they have fallen by an average of 4.3 basis points in the month in the past eight years. Part of this is due to declines in US Treasury yields, as Singapore’s bonds often move in tandem with them due to a lack of an interest-rate policy anchor in the island state.
Slower growth of outstanding local dollar corporate bonds will also be a tailwind for Singapore sovereign notes for the remainder of 2025, Citigroup strategist Gordon Goh wrote in a note on Nov 10. This is because it reduces competition for investor funds. BLOOMBERG
