Singapore's bond market is about to shine, and here's why. A perfect storm of factors is brewing, and it's all good news for investors. Barclays predicts a surge in demand for Singapore's government bonds, with yields on the 10-year sovereign debt already dropping by a significant 100 basis points in 2025, the most in all of emerging Asia. But here's where it gets controversial... the key reason for this surge in demand? A reduced net supply of government bonds and improved liquidity.
Audrey Ong, a strategist at Barclays, explains, "We anticipate a negative net supply of government bonds by year-end." This, she adds, will bolster liquidity and create a strong demand for these securities. Barclays projects the 10-year yield to drop further, reaching 1.6% by December 31, down from the current 1.85%.
Investors are on the hunt for safe havens beyond US assets, and Singapore's bonds, with their AAA rating and impressive performance in 2025, are an attractive option. And this is the part most people miss: the Monetary Authority of Singapore (MAS) is set to offer the lowest net supply of T-bills since 2019, with only around $23 billion issued so far in 2025.
The loan-to-deposit ratio, according to MAS, stood at a low 65.5% in September, the lowest since 2021. This has further enhanced onshore liquidity, keeping borrowing costs in the interbank market at their lowest levels since June 2022.
Seasonality also plays a role. Singapore's 10-year bond yields have a tendency to decline in November, with an average drop of 4.3 basis points over the past eight years. This is partly due to the decline in US Treasury yields, as Singapore's bonds often mirror these movements due to the island state's lack of an interest rate policy anchor.
Gordon Goh, a strategist at Citigroup, highlights another tailwind for Singapore's sovereign notes: the slower growth of outstanding local dollar corporate bonds. This reduces competition for investor funds, making Singapore's sovereign bonds an even more appealing investment for the remainder of 2025.
So, is Singapore's bond market the next big thing? With all these factors aligning, it certainly seems so. But what do you think? Are you ready to jump on the Singapore bond train, or do you see potential pitfalls that others might be missing? Let's discuss in the comments!
