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Post-Brexit uncertainty to shore up demand for Singapore government bonds: analysts

AAA-rated debt is getting scarce.

Relatively high-yielding Singapore Government Securities (SGS) should see higher investor demand in the aftermath of the Brexit, a report by DBS said.

"With the AAA-rated space getting scarce and the universe of negative-yielding debt surging, Singapore Government Securities (which are relatively high yielding) should see greater demand," the report noted, adding that ten-year Singapore Government Securities still yield some 40 basis points above ten-year US Treasuries.

The report noted that SGD swap spreads have collapsed over the past few months, largely on the back of improved domestic liquidity conditions and a relatively stable Singapore dollar through the Brexit aftermath.

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"We think that the bulk of swap spread compression is likely over and the Singapore Government Securities curve compared to the US Treasury curve offers more relative value,” DBS said.



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