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.

"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.