[SINGAPORE] Demand for Singapore Government Securities (SGS) bonds is set to stay high amid investor caution, as traders flock to safe havens on tariff uncertainty and Middle East tensions, an RHB report said on Wednesday (Jun 25).
This comes as SGS 10-year yields have trended lower since the start of the year, diverging from US treasury 10-year yields – which spiked to as high as 4.5 per cent in 2025. That was driven by tariff uncertainty, concerns about US debt levels, as well as downside sentiment arising from waning US exceptionalism and the de-dollarisation trend.
With falling yields, SGS bonds have enjoyed a rally “largely supported by traders’ flight from US assets”, said RHB analysts Barnabas Gan, Laalitha Raveenthar and Muhammad Fahmi Hawari.
“On a year-to-date basis, the SGS 10-year yield has dropped by 57 basis points to 2.28 per cent. In contrast, the spread between US treasury (yield) and SGS (yield) has widened to around 206 basis points,” said the analysts.
“We believe that SGS will continue to benefit from high demand from investors for a safe haven amid the backdrop of tariff uncertainty and heightened Middle East tension,” they added. US President Donald Trump acceded to a 90-day pause on all reciprocal tariffs which is ending in July. That is exempting the pause with China which started in May.
Singapore assets’ safe-haven appeal
Pointing to Singapore’s established safe-haven status, the analysts noted that the city-state’s economy has earned a reputation for resilience amid uncertainty since the 2008 global financial crisis (GFC), where its recovery surpassed that of peers.
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They noted that in 2010, the Republic’s gross domestic product notched double-digit growth at 14.5 per cent, which was “significantly higher than the growth rate of other major economies”, most of whom were still reeling from the aftermath of the GFC.
“This, in turn, spurred a positive sentiment towards Singapore assets, (as) the SGS 10-year (yields) trended lower at a range of 1.29 to 1.61 per cent, reflecting high inflows into Singapore from 2011 to 2012,” they said.
During the pandemic, SGS yields continued to enjoy a downside bias, the analysts observed. At that time, the 10-year yields of SGS were “comparable” to those of US treasury 10-year yields as heightened investor caution drove traders to safe havens, they said.
Global uncertainty to drive risk-averse inflows
With persistent global uncertainties, safe-haven assets will continue to draw “strong demand”, said the analysts.
“In such an environment, SGS… (will) continue to attract risk-averse capital inflows… despite the US’ reshoring push, we maintain a downside bias for SGS yields,” they said.
They noted that SGS are backed by Singapore’s strong sovereign credit rating, sound fiscal position and stable macroeconomic fundamentals.
Moreover, SGS have benefited from the Singapore government’s high levels of governance transparency, fiscal prudence and pro-business policy.
“While structural changes in global trade may eventually shift capital allocations, in the near to medium term, elevated risk aversion and flight-to-safety behaviour are expected to exert continued downward pressure on SGS yields, reinforcing Singapore’s position as a preferred financial safe haven in Asia,” they said.
